21st Century Fox is in talks to create a venture with Ion Media Networks that would operate a large number of Fox affiliate stations, according to a Bloomberg report.
The move could pull network programming from Fox affiliates owned by Sinclair Broadcast Group, which recently out bid 21st Century Fox for Tribune Co., which owns 14 Fox affiliates, the report said.
The potential deal would put together 60 of Ion’s independent stations with Fox’s 28 stations. The Ion stations could also gain the Fox affiliation in 26 markets where Sinclair owns Fox affiliates.
21st Century Fox reportedly considered a similar structure with Blackstone Group when it looked at acquiring Tribune stations earlier this year. Sinclair agreed to buy Tribune’s stations for $3.9 billion.
Network affiliates are generally valued higher than independent stations.
21st Century Fox, controlled by Rupert Murdoch and his family, are concerned that once it acquires Tribune, Sinclair would have leverage in its negotiations with Fox over issues such as splitting retransmission fees and carrying network programming.
“Fox is looking to increase scale, though the structure and practicality of the shift is unclear,” said analysts John Janedis of Jefferies, in a note reacting to the report.
Jenedis noted that “if Fox were to shift the affiliations to Ion, the channel positions would likely not be as attractive, suggesting lower ratings / ad revenue. On the other hand, Fox would likely get much better economics from Ion relative to SBGI. At the end of the day, it could be a public negotiation, but we reckon will have negative implications for the stocks in the near-term.”
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