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Rule change readies a Renaissance

Among the leading candidates for the role of station group gorilla in a post regulatory world are companies such as Renaissance which, backed by financier Warburg Pincus, has acquired six stations covering 7% of the market since it was formed in 1988. It’s now regarded by Wall Street as one of the hottest station group operators around.

A recent report on the company by Donaldson Lufkin & Jenrette said “Renaissance has recorded above-average growth versus the rest of the industry.” It attributed the performance partially to the fact that most of its stations are fast-growing Fox affiliates and partly to “management’s ability to reduce costs at its acquired stations and to control costs at its existing stations.”

Renaissance chairman Michael Finkelstein said he could see “exciting opportunities” opening up if the duopoly rules disappear, allowing station groups to cluster like the cable industry does.

Practical partners

Finkelstein agreed that it would make sense for station groups to partner with networks but he was vague about whether Renaissance would seek such links. “We are very flexible and we will do what is in the best interests of our shareholders,” he said.

Other keen buyers include:

* Young Broadcasting, which went public in November at the same time CapCities invested $25 million. The investment was tied to Young’s plan to buy three ABC affiliates, increasing its station count to nine.

Young is eager to grow further, CFO Jim Morgan said. After a recent bond issue to refinance its bank debt, Young put in place a new $127 million acquisition facility dedicated to financing new station purchases.

Despite the new bank facility, Young will still look for equity financing from a network if the deal is suitable, Morgan said. In addition to its existing investment, CapCities may invest more in Young if the company buys any other ABC affiliates. But Morgan insisted that CapCities was a shareholder in Young, not a partner.

* Granite Broadcasting is also interested in equity tie-ups with one or another of the networks, according to its chairman Don Cornwell. Like Renaissance, Granite was formed in 1988. Cornwell came out of Wall Street and he and president Stuart Beck, who is an attorney, say they bring a “fresh set of eyes” to managing stations.

Granite growth

Its recent $95 million purchase of WWMT in Grand Rapids, Mich., took Granite to nine stations, covering 4.2% of the national audience, and the broadcaster now wants to improve the management of its stations and reduce debt.

Cornwell did not rule out buying another station if the right opportunity presented itself. He said the company still has a $50 million credit line for acquisitions. But Cornwell made clear that the main opportunity he saw was in buying stations in partnership with networks.

Identifying markets

“I can’t define exactly how we would be partnered with people, but the way we see opportunities, there are some big markets where there are lots of allocated facilities. Some of the networks may want to buy and program those, and we think we might be good partners with them in some of those kinds of situations,” Cornwell said.

* ABRY Communications is also back in action with its $500 million purchase of Act III Broadcasting’s eight TV stations last week. ABRY still has $150 million to shop with.

ABRY, headed by partners Andrew Banks and Royce Yudkoff, made a name for themselves in the late ’80s as turn-around specialists. The group took five TV stations that were all but dead and turned them into contenders.

* Sinclair is also a fast growing group. It recently had a successful initial public offering and will likely be the biggest benefactor if duopoly rules are relaxed, since it is involved in several local marketing agreements that allow it to run two stations in one market.

-Joe Flint in Los Angeles contributed to this story.

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