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Tribune Becomes Largest Station Owner — and Retrans Player

Tribune Media’s recent agreement to acquire 19 broadcast stations in 16 markets from Local TV will create a 42-station powerhouse with reach spanning both coasts, creating yet another formidable presence in retransmission- consent negotiations and possibly sparking further consolidation in the broadcast market.

Tribune, which already had 23 stations, superstation WGN America and eight major-market newspapers, becomes the largest U.S. commercial TV station owner in as a result of the $2.7 billion deal. It also becomes the nation’s largest affiliate for Fox and The CW and expands its total reach to 50 million homes.

For cable operators, the deal creates another beefy station group that will be able to flex its negotiating muscles in retransmission-consent talks.

On a conference call with analysts, Tribune chief financial officer Chandler Bigelow said retrans revenue, over time, could account for 15% or more of the combined company’s overall revenue, compared to about 10% of Tribune’s overall revenue today.

“I would say that over time, retrans will be a much larger percentage of our overall revenue,” Bigelow said, adding that in the past Tribune has used retrans to help launch networks like Food Network (of which it owns 30%) and WGN America. “Clearly this is one of our biggest opportunities.”

In 2012, Tribune’s TV revenue was about $1.1 billion, meaning its total retrans haul was about $100 million for 23 stations. Privately held Local TV is expected to contribute about $100 million in “synergies,” mostly through increased revenue, over the next five years.

Local TV was formed by private-equity group Oak Hill Capital Partners in 2007. In March, Oak Hill announced its intention to sell its stations.

In a research note last week, Wells Fargo media analyst Marci Ryvicker wrote that with another $4 billion in station assets owned by private equity, she expected more station deals to come.

“We continue to see the M&A pipeline as robust and anticipate [Sinclair Broadcast Group] and [Nexstar TV] being participants over the next 12-18 months,” Ryvicker wrote.

The deal comes just months after Tribune emerged from Chapter 11 bankruptcy protection and as it looks to sell off some of its newspaper properties, which include the Los Angeles Times and Chicago Tribune. It is the latest in what has been a flurry of broadcast station deals.

On June 13, Gannett said it would acquire Belo’s 20 stations for $2.2 billion in cash and assumed debt. That deal followed Sinclair’s June 4 purchase of four stations from Titan Television Broadcast Group for $115.4 million and Media General’s June 6 all-stock deal to merge with Young Broadcasting, adding 12 stations to its portfolio.

On the retrans front, the combination puts Tribune in a “better position to have a better conversation with MVPDs,” Tribune CEO Peter Ligouri said on the conference call.

Tribune will definitely be able to keep more of that retrans revenue, at least for the next five years. On the call, Liguori said Local TV does not have to pay its seven Fox network affiliates reverse-compensation fees — basically the network’s cut of its stations’ retransmission-consent revenue — through 2018.

“That puts us in a great position to further partner with Fox,” Liguori said. “There is tremendous value in us not paying reverse retrans between now and 2018.”

Tribune at a Glance

The Local TV deal makes Tribune Media the largest commercial TV-station owner in the country:

Number of Stations: 42

Key Markets: New York, Los Angeles, Denver, Milwaukee, St. Louis, Chicago, Cleveland, Kansas City, Salt Lake City

U.S. Television Homes: 50 million

Affiliations: Fox (14 stations), The CW (14), CBS (5), ABC (3), NBC (2); 4 independents

SOURCE: Tribune Media