Tribune Co. is finally nearing the finish line of its bankruptcy proceedings, one of the longest and most contentious for a media company, and now industry players are wondering where that leaves its 23 TV stations.
Chatter about potential bidders for the Tribune Broadcasting group is mounting amid speculation that Tribune’s post-bankruptcy owners — a clutch of its major debtholders — will look to sell off the company’s newspaper and TV assets, probably in piecemeal fashion. Sources close to the situation caution that the post-bankruptcy plans are still very much in flux as they clear the last hurdles of getting a judge to approve the hard-fought restructuring plan.
Industry insiders believe that sales of Tribune’s newspapers, which include the Los Angeles Times, Chicago Tribune and Baltimore Sun, are a given. But sources note that the new regime may look to hang on to the station group, at least in the short term, as it is the most profitable unit of Tribune.
The stations have been valued in the bankruptcy proceedings at about $3 billion. If some or all of the outlets wind up on the auction block, the timing is less than ideal, as prices have come way down in recent transactions. And the list of likely suitors for Tribune’s stations is limited by a number of factors.
For one, the biggest broadcast groups, including Fox, CBS and NBCUniversal, would have a hard time buying Tribune even if they wanted to because of federal limits on the number of stations that can be owned by a single entity. Other sizable broadcast owners such as Hearst, Gannett Co. and Belo Corp., have traditionally focused on Big Three network affiliate stations, and Tribune’s lineup only includes one ABC affiliate. Disney has shown no interest in expanding its TV station holdings for more than a decade.
In all, Tribune owns stations reaching about 35% of U.S. television households, including 13 CW affiliates in New York; Los Angeles; Chicago; Dallas; Houston; Washington, D.C.; South Florida; Denver; St. Louis; Portland, Ore.; Indianapolis; Hartford, Conn.; and New Orleans. It also has seven Fox affils, two MyNetwork TV and the ABC affil in New Orleans. Tribune has duopolies (ownership of two stations in the same market) in Seattle, Indianapolis, Hartford and New Orleans.
Duopolies are coveted by broadcasters because they offer more market share and economies of scale. Two broadcast groups that might be interested in some Tribune stations, Lin Media and Sinclair Broadcast Group, don’t match up well with Tribune’s markets, which means there would be limited opportunities to create duopolies.
Last month, Lin Media acquired New Vision Television’s 13 stations for $330 million. Sinclair made two sizable deals lately — of Four Points Media and Freedom Communications stations — for about $600 million total. E.W. Scripps acquired McGraw Hill’s stations for $200 million.
It all adds up to a tough market to orchestrate a big-bucks sale, which may encourage the new owners to hang on . Still, some who have been close to the bankruptcy process say Tribune’s new owners simply want out and will look to expedite sales.
“It’s a big group and it’s hard to see just one buyer for all of it,” said the CEO of one broadcast group.
The stations along with Tribune’s newspapers led by the Los Angeles Times and the Chicago Tribune, plus other assets have been virtual hostages since investor Sam Zell acquired the company in 2007 in an $8.2 billion leveraged buyout that loaded it with debt just as the country plunged into an economic and advertising meltdown. Zell himself called it “the deal from hell.” Tribune filed for bankruptcy in December 2008 with $13 billion of debt on its books.
“It’s been perilous, perilous situation,” said a CEO of a rival broadcast group. “It’s hard to be in reorganization for this long in the midst of a digital revolution when you really need leadership and strategic vision.”
Disputes between sparring parties in Tribune’s bankruptcy process have mostly been ironed out and Wilmington, Del., Judge Kevin Carey is expected to issue a final ruling on the revamp ahead of a key hearing in mid-July. With the restructuring approved, Tribune will ask the FCC to transfer its broadcast licenses to a trio of new owners, former senior debtholders Oaktree Capital, Angelo, Gordon & Co. and JP Morgan Chase. Reps for all three firms declined to comment on plans for Tribune.
Execs say consolidation has become an imperative, particularly for groups that don’t own the top three or four stations in their markets, or have duopolies. That may bode well for an unexpected suitor to step up for a Tribune buy.
“The strong get stronger and weaker stations are looking for ways to partner up or exit the business because the economics are more difficult than ever,” said one industry player.
(Cynthia Littleton contributed to this report.)