Sinclair Broadcast Group, the biggest US local television station owner, has struck an agreement to buy Tribune Media for $43.50 a share, valuing Tribune at about $3.9bn.
The transaction is the first big move of an expected consolidation wave in media unleashed by the Federal Communications Commission’s recent decision to effectively loosen a cap on local television station ownership.
The rule change has US media companies jostling to consolidate the country’s local TV station groups. Sinclair fended off other suitors for Tribune including Rupert Murdoch’s 21st Century Fox, which explored making an offer in concert with private equity firm Blackstone, and Nexstar Broadcasting Group, another big station owner.
The deal will see Tribune stockholders receive $35 in cash and 0.23 shares of Sinclair Class A common stock for each share of Tribune Class A common stock and Class B common stock.
The total $43.50 a share offer compares with the $40.29 at which Tribune shares closed on Friday, giving the company a market capitalisaiton of $3.5bn. The deal will include the assumption of $2.7bn in debt.
Combining its holdings with Tribune will give Sinclair more leverage in negotiations with national broadcast network owners such as Fox, which pay local station owners lucrative fees to carry their channels.
Sinclair operates 173 stations in 81 small and medium-sized markets including Baltimore, Maryland, Wichita, Kansas and Salt Lake City, Utah. Tribune, a station group that used to be part of the company that owned newspapers such as the Los Angeles Times, owns 42 stations, many in major markets including New York, Chicago and Los Angeles. It also owns the cable channel WGN America.
The deal will also allow Sinclair to expand its broadcasting to a larger swath of the US. David Smith, its chairman and largest shareholder, was a supporter of Donald Trump during the presidential election and has used his stations to advance conservative-leaning news and opinion.
Fox had hoped to trump a Sinclair bid by teaming up with Blackstone in a joint venture that would have seen Blackstone providing the cash and Fox injecting its own portfolio of 28 owned and operated stations.
Fox’s broadcast network is carried by dozens of other stations, some of which are owned by Tribune and Sinclair. Its interest in Tribune was partly defensive: if Sinclair succeeds in buying Tribune it will own these stations and be better placed to drive a harder bargain in carriage negotiations with Fox.
Interest in local station owners has increased since the FCC reinstated what is known in regulatory circles as the “UHF discount”. That change means station owners will not have to include channels broadcast over UHF waves in calculating how many markets they reach, because of signal strength. With companies not allowed to broadcast to more than 40 per cent of the US, reinstating the discount effectively means a barrier to owning more stations has been lifted.
The discount move is the first of many to relax controls over media ownership that are expected under the new FCC, led by Ajit Pai.
Sinclair’s bid for Tribune was first reported by Reuters.
Tribune Media declined to comment. Sinclair did not respond to a request for comment.