$2 bil offer sweetened by Peacock coin

NEW YORK — NBC appears likely to get itself an O&O station in Dallas after all.

Investment firm Hicks, Muse, Tate & Furst on Wednesday upped its bid for Lin Television to the tune of $2 billion, surpassing a rival offer from Raycom Media, which promptly dropped out of the race.

The latest offer is worth $55 a share in cash, or $1.77 billion, plus the assumption of $270 million in Lin debt. It tops a bid by Raycom last week of $52 a share, and Hicks, Muse’s own August bid of $47.50, which Wall Streeters had deemed too low and prompted threats of shareholder lawsuits. (Lin shares closed Wednesday up $1 to $53.13.)

Absent still another bidder, Hicks, Muse early next year will flip KXAS Dallas into a new partnership with NBC, 80% owned by the Peacock, that will also include NBC-owned KNSD San Diego, while Lin’s other NBC affils, WAVY Norfolk, Va., and KXAN Austin, Texas, will remain with Hicks, Muse. Lin also owns three CBS affils, two ABC stations and four stations operated under local marketing agreements, most tied to the WB weblet. Under terms of the partnership, NBC also will sell Hicks, Muse WVTM Birmingham, Ala., and extend affiliation contracts with all Hicks, Muse stations until 2010.

NBC didn’t agree to directly fund the initial Hicks, Muse offer, but a spokesman for the Dallas investment firm confirmed the network “did provide a portion of the sweetened amount,” said by one source to equal about $50 million. But NBC also is contributing cash to the partnership that will own the two stations proportionate to its share in the combo.

NBC was reluctant to bid for Lin outright because of the group’s non-NBC stations; and it couldn’t buy the Peacock affiliates directly from Lin because of severe tax consequences. But it’s no secret NBC has been eager to acquire more large O&Os — it has just five of the 10 top markets — and KXAS represents a strong station in the Southwest, where the network currently has no presence. The station repress 40% of Lin’s total cash flow.

“It’s clearly attractive for them; Dallas is a great market,” said Matthew Harrigan, a J.P. Morgan analyst. “Their O&O group could certainly use a little bit more muscle.”

Raycom, backed by the Alabama state pension fund, didn’t offer an explanation for its refusal to up the bid, but prexy John Hayes said in a statement, “We congratulate (Lin’s) shareholders for receiving almost $250 million in cash above the original Hicks, Muse contract.”

But Hicks, Muse’s offer, at 11-1/2 times broadcast cash flow, is in line with other recent station sales and doesn’t represent a huge premium.

Others believe that in addition to the higher pricetag, Raycom might have been scared off by veiled threats from NBC suggesting it might pull its affiliation agreements from three Lin stations in the event of a sale to another bidder, which could have dramatically diminished the value of the deal and made it harder for Raycom to secure financing.

The prospect “may make the difference between $55 and going (up) to $58,” Harrigan said.

It remains a possibility that a third company could make a run for Lin, whose sale is prompted by 45% owner AT&T Wireless’ decision to sell its stake. In a rapidly consolidating TV station business, another bidder could surface, although until Raycom’s offer late last week Lin had received no offers since the Hicks, Muse deal was announced in August. The breakup fee that a new suitor must pay Hicks, Muse has more than doubled to $74 million, or $2 a share, with the revised bid, providing another deterrent.

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