With Monday’s announcement that it had hired advisors to examine strategic alternatives to improve its stock price, Tribune Media has opened the door to the possibility of spinning off or even selling its TV stations.
“All options are on the table right now,” says Paul Sweeney, an analyst at Bloomberg. “When you hire advisors, make a public opinion, it suggests (they’ll weigh) all offers.”
The company’s stock has “really underperformed,” Sweeney says, as it is down around 45%. “Investors are uncertain about the strategy for growing the business. The company has been under pressure.”
Tribune has a diverse portfolio of assets, including cable network WGN America and digital operations such as online job site CareerBuilder, but “the real value of the company is in the TV stations,” Sweeney says. Tribune Broadcasting, with 42 owned or operated local stations reaching over 50 million households, is one of the country’s biggest station groups. While TV revenues, at $464 million, were down 3.4% from the prior year quarter, that’s mostly a result of 2015 being a non-election year.
Investors prefer a greater focus, Sweeney says, meaning Tribune might look at becoming a pure-play TV group or just a cable group rather than “all things to all people.” The announcement Monday puts the process in motion for Tribune, giving it flexibility to think about spinning off or selling different things while providing potential buyers an opportunity to look at different aspects of the company.
“I don’t necessarily see them selling broadcast stations now,” says Larry Patrick, founder and managing partner, Patrick Communications. “I don’t think you kill the cash cow. You sell some of the other stuff.”
TV is after all still immensely profitable, as evidenced by its $464 million of reported TV revenue this past quarter. Patrick thinks it is more likely Tribune sells or spins off other assets, like digital.
Separating broadcasting and publishing assets has been a trend of late. Tribune in August 2014 spun off major daily newspapers like the Chicago Tribune and Los Angeles Times into Tribune Publishing. Tegna, for instance, is the result of Gannet’s recent split of its publishing and broadcast businesses. Even more recently, Nexstar agreed to acquire Media General; the months-long pursuit concluded with Media General ending its merger agreement with Meredith, which played up its publishing and digital assets, in favor of the pure-play broadcast company with Nexstar.
Tribune has in some ways two companies of TV stations: its longtime stations consisting of a lot of big-market CW stations and few Fox affiliates and the middle- and small-market big four affiliate stations it has acquired along the way. “It’s sort of two companies there that have been blended together,” Patrick says.
Those big-market stations include all five of the top DMAs — CW affiliates in New York City, Los Angeles, Chicago and Dallas and a MyNetworkTV in Philadelphia.
“Assets like these don’t come the market very often,” Sweeney says. “It might be a good time to test the waters.”
That might mean the spectrum auction. Tribune could start to get out of the TV business by selling in the auction, or, perhaps more likely, Patrick says, selling some of the lucrative big-market airwaves and either channel share or just keep the money.
“I expect them to be players in the auction and come out with a big pocket full of change,” Patrick says. “If they sell the big stuff in the auction, it makes it easier to sell the smaller stuff (later).”
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