Raycom tops Hicks' offer for station group

NEW YORK — A rival bid for Lin Television Corp. threatens to spoil plans by Hicks, Muse, Tate & Furst to acquire the coveted station group in a $1.7 billion deal.

Raycom Media, a Montgomery, Ala., holding company backed by the Alabama state retirement system, has made an offer said to be worth $50 a share to buy Lin’s 12-station group, led by NBC affil KXAS Dallas.

The new offer — topping Hicks Muse’s $47.50 cash bid — didn’t surprise Wall Streeters, many of whom believed the initial pricetag to be undervalued in the currently heated market for TV stations. Lin’s stock price, trading recently in the mid-$40 range, suggested an expectation that new bidders could surface.

“In an environment like this I definitely thought an overbid was possible, because the valuation they were getting was pretty low,” said Laura Linehan, an analyst at Gabelli & Co. Lin’s station lineup was expected to fetch more than the 12 times cash flow multiple that Hicks Muse’s bid was worth.

Hicks Muse declined comment, but the Dallas-based investment firm could seek to match the latest offer. Lin shares Thursday climbed $4.19, to $50.75, on news of the rival bid, which the company didn’t identify. But a Raycom spokeswoman said the company “will be confirming” its offer.

Prompted by news of a rival suitor, NBC on Thursday officially confirmed plans to enter a complex partnership with Hicks Muse, predicated on closing of the Lin deal (Daily Variety, Sept. 12). The companies would put both KXAS and NBC-owned KNSD San Diego into a joint venture valued at $1 billion and 80% owned by NBC, and NBC would transfer O&O WVTM Birmingham, Ala., to Hicks Muse, sources said. NBC also agreed to extend affiliation agreements with stations owned by Lin, Hicks Muse and its affiliated Sunrise Television through 2010.

In what appeared to be a veiled threat to would-be rival suitors, NBC said any third party would need its consent to remain affiliated with the network, and Lin confirmed that another bidder also would be required to pay a $32 million breakup fee to Hicks Muse under terms of an agreement signed in August.

But the loss of the Lin stations, particularly KXAS, would be a blow to NBC, which has longed hope to expand its O&O group to the Southwest region and to more top 10 markets, where it currently owns just five stations.

NBC is unlikely to bid for Lin outright, because five of its eight core stations, and four more operated under local marketing agreements, are tied to other networks, and severe tax liabilities would preclude spinning off stations to new buyers later.

Raycom, the $16 billion Alabama retirement system headed by David Bronner, may seem an unlikely candidate, but last year it began snapping up station groups at a frantic pace, spending $1.4 billion in the space of three months.

In May 1996, it acquired the 12-station Ellis Communications group for $732 million, adding Federal Enterprises’ eight outlets a month later for $166 million and the seven-station group owned by Georgia insurer Aflac in August for another $485 million. Nearly all are in smaller markets.

Still, a Lin purchase would mark its largest TV deal by far in a rapidly consolidating marketplace, and the stakes may still go higher.

Lin on Thursday reported what Linehan termed “very good” third-quarter earnings, with net income up 2% and broadcast cash flow gaining 11%, to $35 million, compared to a year-ago quarter substantially helped by NBC’s Olympics coverage. That may fuel interest in a heightened bid, and other investment firms could also surface to vie for an increasingly rare station group that’s on the block.

The sale was prompted by AT&T Wireless’ decision last December to sell its 45% stake in Lin.

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