A boldface name has been active in the TV station M&A realm of late, and both his reputation and his billions have the broadcast community eagerly anticipating his next move. Michael Dell, founder of the computer manufacturer that bears his name, has been quietly buying up independent stations in major markets and acquiring broadcast spectrum in anticipation of, industry watchers believe, a big payoff at FCC auction time.
Some of the prices Dell’s OTA Broadcasting division has been paying are catching station brokers by surprise, and sparking heightened interest from other strategic grabbers. “The speculators are out there, playing the spectrum speculation game,” said John Tupper, partner at broadcast investment banking firm Kepper, Tupper & Co. “A lot of people made a lot of money in the 700-megahertz auction [in 2008]. They’re looking to do the same thing [in the next auction].”
Dell has been increasingly in the spotlight of late, with the billionaire agitating to take Dell Corp. private in a leveraged buyout worth some $20 billion. Last week, The New York Times reported Microsoft is expected to kick in several billion for a piece of the company.
Dell’s own MSD Capital Management has a varied portfolio that includes securities, real estate and Torchlight TV Investments, parent of OTA Broadcasting, which is based in Fairfax, Va., and is run by William Tolpegin and Todd Lawyer. Calls to both MSD Capital in New York and OTA Broadcasting did not shed light on Dell’s broadcast strategy. “On behalf of OTA Broadcasting and MSDC Management, L.P., the company’s financial sponsor, I would like to decline comment for the article,” a spokesperson said via email.
OTA’s acquisitions follow a pattern of low-power stations in the top 10-15 markets featuring high population density with a good percentage of tech-savvy consumers among them—key factors when the wireless communications outfits make their bids on spectrum. “Not many people know as much about mobile devices as someone who makes computers,” said one veteran dealmaker.
The acquisitions include KTLN San Francisco for $8 million and KFFV Seattle for $5 million in 2011 (KFFV’s leadership announced last week it will air WeatherNation programming). Last year, OTA acquired WEBR in New York for $6.6 million, along with KUGB Houston for $2.3 million. A " urry of deals already in 2013 has industry watchers tuned in: OTA bought WLCW Providence (R.I.) from Sinclair for $13.75 million—an outlier in the group, based on it being a CW affiliate—and WYCN in Nashua, N.H., for $4.1 million.
The latter deal had station brokers scratching their heads. While it is licensed to the Boston DMA, low-power WYCN currently reaches a modest section of South Nashua over the air that includes a wildlife sanctuary, according to FCC documents. It airs reruns under “My Family TV.”
The seller, William Binnie’s New Hampshire 1 Media, noted the “extraordinary profit” it made on WYCN—nearly $4 million, boasted a news release, on the $4.1 million deal.
“Dell sees the value of [WYCN] to be more than what he paid,” explained one veteran broadcast consultant. “Substantially more.”
While it’s hard to get a major broadcaster to admit it will be a seller when the spectrum incentive auction eventually rolls around, Dell is not the only one placing strategic bets prior to the action. In recent years, NRJ TV has acquired WMFP Boston, KCNS San Francisco and WTVE Philadelphia; like OTA’s portfolio, the acquisitions are tiny independents in major markets. In December, NRJ grabbed WGCB Lancaster (Pa.), a Me-TV affiliate, for $9 million.
Also in December, LocusPoint Networks, headed up by Ravi Potharlanka, paid $1.25 million for low-power WRCF Orlando (Fla.).
“These spectrum speculators believe that the upcoming television spectrum auction provides them an opportunity for an arbitrage play,” said Larry Patrick, managing partner of the station brokerage firm Patrick Communications.
The FCC’s 2008 auction generated almost $20 billion. All eyes are on the next auction, which is designed to free up broadcast spectrum for wireless operators. Amid considerable Beltway wrangling, not to mention broadcaster opposition, some do not see the landmark event happening this year or next. “I think that’s probably wishful thinking. There are a lot of issues that are yet to be resolved,” Tupper said, mentioning the cellular communications meltdowns during Hurricane Sandy.
All of which gives Dell more time to acquire chunks of spectrum, and to further pique the broadcast community. Dell’s track record alone makes him a player worth watching. “I don’t see the plan, but he’s smarter than I am,” said one veteran GM who asked not to be named. “He’s also richer than I am.”
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