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Sinclair Aces Tennis Channel Deal

Sinclair Broadcast Group has agreed to purchase independently-owned Tennis Channel for $350 million, the organization announced Wednesday. Sinclair will acquire the assets of the 24-hour channel, which currently has 30 million subscribers. Sinclair stated that it has already negotiated agreements with a number of distributors to add an additional 20 million homes to the network’s subscriber count.

[RELATED: Sinclair wanted to expand into cable and determined that more carriage for Tennis Channel would be "a palatable ask" for distributors.]

“Tennis Channel is an established property with high-quality content and advertisers, and is vastly under-compensated and under-distributed relative to the value it brings to its viewers. It was the only independently-owned major sports network left, and we knew we could unlock value through a tuck-in acquisition,” David Smith, CEO of Sinclair, said in a release.

Launched on May 15, 2003, Tennis Channel holds telecast rights to such marquee pro tennis events as the U.S. Open, Wimbledon, Roland Garros (French Open), Australian Open, ATP World Tour Masters 1000 events, top-tier WTA competitions, Davis Cup and Fed Cup by BNP Paribas, and Hopman Cup.

Ken Solomon, chairman and CEO of the Tennis Channel, added in the release: “In Sinclair we have found the perfect owner-partner to accelerate scaling the Tennis Channel brand and our sport’s expanding fan-base to the next level. Sinclair’s unique size and position in the media ecosystem will facilitate significant distribution growth towards parity with our competitive set and expand our brand’s assets and unique value as the go-to destination for all things tennis in the U.S. and beyond. The larger platform will immediately help develop incremental advertising and sponsorship business and puts us in a great position to enhance our already comprehensive rights portfolio domestically as well as develop the brand internationally.”

At the start of a conference call with reporters, Solomon noted the patience of Tennis Channel's private equity investors in hanging in while management sought a suitable buyer. For Tennis Channel, he said, a suitable buyer or partner was "somebody who recognizes the inherent value of the asset that we built and who can bring real strategic resources to growing it and scaling it to the next level.” A longtime cable executive and entrepreneur, Solomon, when asked if was staying on at the channel, said: “I am not only staying I am committed to staying, excited to stay and I can’t wait for what’s next.”

Solomon said the channel's size constraints also held it back in terms of being able to acquire certain big tournament rights.

Barry Faber, executive vice president and general counsel at Sinclair, on the call, said Sinclair has been looking to either buy or create a cable channel and found a good fit in Tennis Channel, given the value of live sports programming and the fact that, in Sinclair's view, Tennis Channel had a lot of upside potential with distributors. He said he was confident the channel would make gains with virtually all distributors as part of Sinclair's distribution talks.

Faber said he was not sure if he could name, at this time, what distributors had reached agreements to expand the channel's distribution, but he said the expansion of 20 million homes cited in the announcement would take place over about a year. Sinclair has about 170 television stations it owns or operates, he said, overlapping most pay-TV distributors other than Cablevision Systems. Increases would take place both inside and outside of Sinclair markets on pay-TV distributors, he said, including on growing out of sports tiers into broader carriage.

Faber said the desire to expand into cable programming started with the acquisition of Allbritton Communications, which owns a local news channel in the Washington, D.C., market. Sinclair also has been getting into more sports programming and recently launched a sci-fi channel, Comet, on multicast spectrum in partnership with MGM.

As part of the deal, Sinclair officials said the company will benefit from over $200 million of Tennis net operating losses which Sinclair will be able to carry forward to reduce future tax payments, the present value which Sinclair estimates to be worth approximately $65 million.

(This story was updated to correct the name of the executive speaking for Sinclair on the conference call.)