Buyers circle Paxson

Dealmakers optimistic on FCC rule redo

NEW YORK — With TV station ownership regulations looking increasingly likely to be relaxed, prospects for a flood of buying and selling has Wall Street traders — and no doubt investment bankers — giddy with anticipation of another wave of media consolidation dealmaking.

At this stage the FCC looks to be moving inexorably toward raising the 35% national TV ownership cap; rolling back the ban on owning broadcast and newspaper assets in the same market; and relaxing local TV ownership restrictions when it votes on the issue June 2.

The obvious winners are Viacom, Disney and NBC, all of which have expressed interest in expanding their station footprints. News Corp. last week indicated it won’t be making a run on any more stations immediately, particularly as it works to digest its pending acquisition of satcaster DirecTV.

Market expansion

Analysts say any relaxation could be good for combo station-newspaper groups like Tribune, Gannett, Belo, Meredith, Media General, and Scripps, all of whom have informally expressed some interest in expanding their holdings in key markets. Any of these companies, of course, could just as easily be station sellers.

Florida-based station owner Paxson Communications in particular has been riding a bull market for the past few days, as Wall Street speculation that the company’s 66 UHF stations make it a prime takeover target helped the firm’s shares gain more than 50% in two days

Paxson’s O&O stations have 64% national penetration of U.S. TV homes (88% including affils and cable/satellite carriage) and could form the basis of a new national network, according to analyst Richard Rosenstein at Goldman Sachs.

As for the newspaper-broadcast cross ownership rules, observers say the FCC is prepared to roll back the restrictions in large and midsize markets, while keeping it in smaller markets. This would clear the way for companies like Tribune and Hearst-Argyle to widen their station reach.

Less clear is how the FCC will come down on the local TV ownership rules that draw the limit at single market duopolies where there are eight remaining independent TV station owners.

In the next three to four years, every player in the market will become a buyer or a seller, said Legg Mason regulatory analyst Blair Levin, a former FCC official. “In the first phase of deal-making we will see a lot of local station trading and more duopolies as owners look to build more profitable concentrations of assets rather than simply wider footprints,” he said.

According to Leven, “the bigger strategic question in the longer term is whether the leverage created by combining a broadcaster, content business and multichannel operation (such as News Corp. is doing) induces a Viacom to buy Echostar or Comcast to take a look at owning Disney.”