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Station Market Still Sizzling

Barrington Broadcasting cut a deal last week to buy a dozen affiliates from Raycom Media, doubling the size of Barrington’s group and buoying the prospects for the station market.

Barrington, which is backed by former AOL COO Robert Pittman’s private-equity firm Pilot Group, agreed to buy 12 Raycom stations in nine markets for $262 million. The price represents about 11 times cash flow, according to executives familiar with the deal.

Raycom is a seller after making a major acquisition of its own. In February, it closed on its $987 million purchase of Liberty Corp.’s station group. Because of some market overlap, the company pledged to sell stations in 12 markets.

Included in the Barrington deal are five NBC affiliates: WNWO Toledo, Ohio; WSTM Syracuse, N.Y.; WPBN and WTOM Traverse City-Cheboygan, Mich.; and WLUC Marquette, Mich. There are also three Fox outlets: WACH Columbia, S.C.; KXRM Colorado Springs, Colo.; and WFXL Albany, Ga.; two UPNs: WSTQ Syracuse, N.Y. and KXTU Colorado Springs; one CBS affiliate in KGBT, Harlingen, Texas; and a single ABC affiliate, KTVO Kirksville, Mo. The deal, subject to FCC and Department of Justice approval, would bring Barrington’s holdings to 18 stations covering 3.4% of the country.

“These stations are in our target area of mid- to small-size markets,” says Barrington President Jim Yager, former head of Benedek Broadcasting. “We still feel there is a very significant opportunity for news and sales in these markets.”

Raycom is still looking to sell KASA Albuquerque, N.M. Last week, it reached a deal with Quincy Newspapers for KWWL Waterloo, Iowa.

Raycom CEO Paul McTear says he remains a buyer, focusing on the Midwest, Southeast and Texas. Like Yager, he sees an upside to smaller markets: “You don’t have eight or 10 signals, you have four or five. News leadership in those markets sets us apart from the competition.”

Station sales perked up last year, with $3.2 billion worth of transactions at an average price of $45.4 million per station, according to new data from Kagan Research. The figures are up from $1.2 billion the year before and $1 billion in 2003. Leading the way were the Raycom-Liberty deal and Emmis Communications’ sales of its stations, which has so far fetched more than $1 billion. Still, sales figures are well below the late 1990s and early 2000s levels, when the economy was robust and several major media companies were in the market for stations.

More impressive than the sale prices are the cash flow multiples on recent deals. According to Kagan, in 2005, stations in markets No. 1 to 25 sold at an average of 16.5 times cash flow, while small-market outlets (No. 76 and higher) averaged 11.5 times cash flow—both significant bumps from the year before.

Forces that have held the market down, however, are still at play. Broadcasters still face restrictions on cross-ownership of newspapers and TV stations, limits on the number of stations they can own in a market, and the station-ownership cap.

But in the face of these concerns, buyers remain bullish. “The market is more robust than you would think,” says station broker Elliot Evers of Media Venture Partners. “There seems to be a good appetite for strong UHF and VHF facilities, even in small markets.”

Adds Yager, “Investors are seeing commercial, over-the-air TV is alive and well and a very viable business.”

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