21st Century Fox has an agreement to purchase seven television stations from Sinclair and Tribune Media for $910 million, in a deal Fox says will grow its broadcast reach to nearly 50% of U.S. households.
Fox will be acquiring KCPQ, a Fox affiliate in Seattle, Washington; WSFL, a CW affiliate in Miami, Florida; KDVR, a Fox affiliate in Denver, Colorado; WJW, a Fox affiliate in Cleveland, Ohio; KTXL, a Fox affiliate in Sacramento, California; KSWB, a Fox affiliate in San Diego, California; and KSTU, a Fox affiliate in Salt Lake City, Utah.
The deal makes good on previous reports of an in-the-works deal between Sinclair and Fox, and adds the San Diego station to the mix of stations that was originally reported to be part of the deal.
"This transaction illustrates Fox's commitment to local broadcasting and we are pleased to add these stations to our existing portfolio. With this acquisition, we will now compete in 19 of the top 20 markets and have a significantly larger presence in the west, which will enhance our already strong platform. This expansion will further enrich our valuable alignments with the NFL, including our new Thursday Night Football rights, MLB and college sports assets. We are also happy to add many talented Tribune employees to our group, some of whom we know well,” Jack Abernethy, CEO of Fox Television Stations, said in a statement.
As part of the new deal, Fox has signed new network affiliation agreements with Sinclair and licensees of stations which have service agreements with Sinclair. Sinclair is also getting the option to acquire two of its Fox Television’s stations: the CW affiliate WPWR in Chicago, Illinois, a market in which Fox Television currently has a duopoly, and Fox affiliate KTBC in Austin, Texas for potential proceeds of approximately $15 million and $160 million, respectively.
To get regulatory consent for its $3.9 billion acquisition of Tribune Media, Sinclair agreed to sell off WGN in Chicago along with 22 other Sinclair and Tribune stations. When those deals were announced last month, several of the stations Sinclair said it was selling were yet to identify a buyer. Now Fox has emerged as that buyer.
Excluding the stations where Sinclair is maintaining service agreements after the sales, the divested stations are being sold for a combined $1.5 billion.
"After the divestitures, we are now acquiring $4.6 billion of enterprise value, which includes $2.4 billion for the core TV and entertainment business, $0.5 billion for real estate held for sale and $1.7 billion for Television Food Network (TVFN). We expect 2017/2018 average synergized net acquired cash flow of $390 million to $410 million on the TV and entertainment segment, reflecting a 5.9x multiple, significantly better than the under 7x multiple initially announced a year ago. By year end 2018, we expect adjusted total net leverage, after synergies and including the TVFN distributions, on a trailing eight quarter basis, to be approximately 4.4x and we expect to quickly delever [sic] from there over the next twelve months. Furthermore, the TVFN partnership financial performance has been extraordinary over the past year, and based on Discovery's recent 8K Filing valuing the Tribune stake at $2.1 billion, the core TV and entertainment pro forma purchase multiple is further reduced from 5.9x to 4.9x,” Sinclair President and CEO Chris Ripley said in a statement.
The Sinclair and Fox deal announcement arrives on the same morning that Sinclair is announcing its first-quarter results. The company said its revenues rose 6.1% to $665.4 million, up from $626.9 million one year ago. Sinclair’s media revenues rose 6% to $643.7 million driven by political revenues of $7 million; distribution revenues that totaled $314 million, up from $276 million one year ago; and digital revenues that increased 71%.
Net income attributable to Sinclair was $43.1 million, down from $57.2 million one year ago.