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Sinclair closes Sullivan buyout

Stock deal valued between $950 mil and $1 bil

NEW YORK — Sinclair Broadcast Group Inc. announced a definitive agreement Tuesday to acquire Sullivan Broadcast Holdings in a stock purchase valued between $950 million and $1 billion.

Baltimore-based Sinclair, viewed by Salomon Smith Barney analyst Paul T. Sweeney as “the preeminent consolidator in the TV industry,” will pick up 13 TV stations from Sullivan. The acquisition, predicted last month (Daily Variety, Jan. 26) and slated for completion next quarter, increases the number of TV properties Sinclair programs, owns or has agreements to buy to 55 TV stations in 37 markets.

Ten of the 13 stations to be acquired from Sullivan are Fox affiliates, thus intensifying Sinclair’s relationship with the network.

Sinclair, an early supporter of Fox, has benefited greatly from the affiliation, but it also has resisted the network’s increasing demands for more air time and expensive news programming. Sinclair is expected to continue holding its own with Fox once the acquisition leaves it with a total of 24 Fox affiliates. In addition, Sinclair owns 59 radio stations in 11 markets.

Boston-based Sullivan, owned primarily by investment fund Abry Partners, will have its final purchase price determined by a multiple of cash flow at its closing.

Sullivan shareholders also will receive, at Sinclair’s option, as much as $100 million of its acquisitor’s Class A common stock.

Sullivan executive VP David Pulido said that after the buyout, the company’s corporate staff would turn its attention to newly created Quorum Broadcasting Co., a privately held smaller-market group that has an acquisition pending to buy the five TV stations of Petracom.

J. Daniel Sullivan, president and CEO of Sullivan, already has the same titles at Boston-based Quorum.

Sinclair, which on absorbing Sullivan will raise its U.S. TV household coverage to 23%, emerged as an aggressive TV consolidator in 1996 with its purchase of River City’s non-license assets for 10 TV stations and 34 radio stations.

More recent acquisitions include News Corp.’s Heritage Broadcasting Group in a deal valued at $630 million and Max Media for $255 million.

Sweeney called Tuesday’s agreement with Sullivan “a great transaction for Sinclair at a good price.”

And, in a recently released report, the Salomon analyst noted that, while Sinclair’s total revenue increased 6% last year, operating expenses declined by 1.3% and program payments were flat. The combination produced a 10% increase in broadcast cash flow, which the analyst described as “a good performance in a nonpolitical year.”

The three remaining TV stations to be acquired from Sullivan are UPN affiliates, although it is not clear they will remain so.

Last year, Sinclair shook up the industry by agreeing to switch the affiliation of five of its TV stations from UPN to the WB. Sinclair exacted from WB a $64 million incentive — payable over eight years — to make the changes, marking the first time either of the upstart netlets paid to secure affiliate allegiance.

UPN responded by slapping Sinclair with a lawsuit, since dismissed, to block the WB deal.

Sweeney, when asked about Sinclair’s allegiance to WB, said: “I’m sure they’re very happy making the switch they did, but I doubt if they’ll switch any of their new UPN stations without considering all their options.”