One week after Sinclair, one of the largest U.S. broadcast station owners, announced a “strategic review” of its business, the Wall Street Journal reports the broadcaster has offered to merge with rival Tegna, according to people familiar with the matter.
The broadcaster, based in Hunt Valley, Maryland – just north of the crime-ridden Baltimore City – has proposed separating its Ventures business, which includes several media assets such as the Tennis Channel, and merging its broadcast TV unit with Tegna in a deal valuing Tegna shares at around $25 to $30.
The deal to merge Sinclair, which operates 178 stations across major markets, and Tegna, which operates 64 stations in major markets, comes as Tegna is in advanced talks with rival Nexstar Media. For context, Nexstar is the largest television broadcaster in the nation, with 200 stations across major markets.
Here is the deal structure according to WSJ sources:
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Structure: Sinclair would spin off its Ventures unit (which includes the Tennis Channel and other media assets) and combine only its core broadcast business with Tegna.
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Valuation: Tegna shares valued at $25 to $30 each (vs. $20.18 closing price, $3.2 billion market cap).
WSJ noted that regulatory changes are driving potential local station mergers: the Federal Communications Commission is reconsidering ownership limits, and a July appeals court struck down the “top four” rule, which had prevented a single company from owning two of the top-rated stations in the same broadcasting market.
In markets, Sinclair shares are hovering around Covid lows…
This consolidation wave comes as the latest from UBS points to continued shifts from traditional cable and satellite TV to streaming. This trend has been well underway for 15 years.
“Streaming surpasses traditional TV in May,” analyst John Hodulik told clients last month.
Not sure if it’s related, but there was a small protest last week in Hunt Valley, where Sinclair is headquartered. Non-profit organizers rallied crazed white baby boomer leftists, angry at Sinclair. It’s unclear if the protest – likely just a couple dozen liberals let out of local retirement homes – was connected to the potential consolidation news.
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