NBC Selling Four Stations

Following the lead of other broadcasters pruning away their smaller stations, NBC is putting four of its owned-and-operated stations on the auction block, hoping to raise more than $600 million, according to people familiar with the deal.

The properties are in NBC’s smallest markets: Raleigh, N.C.; Columbus, Ohio; Birmingham, Ala.; and Providence, R.I. They’re generally healthy, with each ranked among the top stations in late news, a good sign of vitality.

NBC stations group President Jay Ireland wants to shed smaller markets and concentrate in markets where NBC can own a station duopoly or in markets with strong Hispanic demographics to feed the owned-and-operated stations of NBC’s Spanish-language broadcast network, Telemundo. For example, NBC recently bought a station in the increasingly Latino Las Vegas market.

The company owns 29 stations, 14 NBC properties and 15 Telemundo affiliates. All NBC’s O&Os are being pinched by the steep slide in the parent network’s ratings.

NBC executives are also in part trying to exploit the sudden strength in TV prices. Despite low sales and profit growth throughout the industry, recent auctions of stations by Emmis Broadcasting and Liberty Corp. have fetched surprisingly high prices of around 14 times annual cash flow. Radio stations and cable systems, by contrast, are selling for less than 10 times cash flow.

7% of NBC’s Reach

An NBC spokeswoman would not comment on the sale plans. But NBC has tapped investment banker UBS Warburg to shop the stations. According to people familiar with the plan, the banker is still in the process of preparing offering documents and is approaching station owners and private-equity groups that have been circling the business in recent months.

The stations in play are WNCN Raleigh, WCMH Columbus, WVTM Birmingham, and WJAR Providence. Together, they constitute about 7% of the NBC and Telemundo stations’ total reach of 41.7 million TV homes.

Since NBC acquired Telemundo in 2002, the company has integrated the operations in markets where it owns NBC and Telemundo stations. In Los Angeles, KNBC, Telemundo outlet KVEA and Spanish-language independent KWHY share a newsroom and regularly trade reports and video. KNTV, the NBC O&O in San Jose, and its Telemundo sister KSTS recently moved into a new shared digital facility.

A Premium For Fit

Other broadcasters are similarly paring down their holdings where they do not have a duopoly or a strong regional presence. Raycom, for example, is buying Liberty Corp.’s 15 stations but plans to sell off 12 to focus on holdings in the Midwest and Southeast. Viacom has unloaded several UPN outlets where it doesn’t own the CBS station, including in Indianapolis and Columbus.

Station owners will pay a premium when the acquisition fits snugly into its portfolio. Gray Television, which owns several stations in Kentucky and Tennessee, anted up $186 million to buy WSAZ Huntington/Charleston, W.Va., from Emmis Communications. And Viacom paid $285 million to buy CBS affiliate KOVR Sacramento, Calif., from Sinclair to form a duopoly with its UPN outlet KMAX.

In the four markets NBC is selling off, it may be difficult to form a new duopoly, thanks to current FCC ownership guidelines, which are intended to maintain “independent voices” in markets. In Raleigh-Durham, for example, Capitol Broadcasting already owns the Fox and CBS affiliates.

One way around the limits is to obtain a “failing-station” waiver, which would apply to a station that is a ratings or revenue laggard. But it is unlikely that any of the NBC stations on the block would qualify.