There was a big acquisition in the media space this morning as Sinclair Broadcast Group (SBGI) announced a cash-and-stock deal to acquire Tribune Media (TRCO) for $43.50 per share, for an aggregate purchase price of $3.9 bln, plus the assumption of approximately $2.7 bln in net debt. TRCO stockholders will receive $35 in cash plus 0.23 shares of SBGI for each share of TRCO.
This represents a premium of approximately 26% over Tribune's closing share price on February 28, 2017, the day prior to media speculation regarding a possible transaction. It's also an 8% premium over Tribune's Friday close. This will be the largest acquisition in Sinclair's history. The transaction has been unanimously approved by the Boards of Directors of both companies and is anticipated to close and fund in 4Q17.
In case you're not familiar, Tribune Media owns or operates 42 television stations in 33 markets, cable network WGN America, digital multicast network Antenna TV, minority stakes in the TV Food Network and CareerBuilder, and a variety of real estate assets. Tribune's stations include 14 FOX, 12 CW, 6 CBS, 3 ABC, 2 NBC, 3 MyNetworkTV affiliates and 2 independent stations. The group includes stations in the top three and 7 of the top 10 metro areas.
Sinclair is one of the largest TV broadcasting companies in the country with 191 television stations in 89 markets, broadcasting 551 channels. The Company has multiple emerging networks as well as being affiliated with all the major networks. Sinclair is a leading local news provider in the country and a producer of live sports content.
In terms of the rationale, Sinclair sees Tribune Media as highly complementary as Sinclair's existing footprint and TRCO will create a large nationwide media platform that includes the country's largest markets. The acquisition will enable Sinclair to build ATSC 3.0 (Next Generation Broadcast Platform) advanced services, scale emerging networks and national sales, and integrate content verticals. The acquisition will also create substantial synergistic value through operating efficiencies, revenue streams, programming strategies and digital platforms.
The deal came about as part of a strategic review announced by TRCO 15 months ago. That review had also resulted in TRCO streamlining its business, monetizing non-core assets, strengthening its balance sheet and returning more than $800 mln to stockholders. News reports recently have said that media giant 21st Century Fox was in talks with private equity firm Blackstone in a joint bid to acquire Tribune Media. They never wound up making a bid but they apparently thought about it.
In sum, the deal seems t make sense as it gives Sinclair an even larger base of TV stations and the premium for TRCO was pretty good if you also take into consideration how much the stock had moved since news reports starting saying a deal was possible. Looking ahead, the deal will need approval by the Federal Communications Commission (FCC), and antitrust clearance. It's possible some divestitures will be necessary.