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Sinclair to purchase Sullivan Deal could be worth $1 billion, gives firm 14 new TV stations; Most are Fox affiliates; Company continues to gain outlets in mid-size markets; Broadcasting

Sinclair Broadcast Group Inc. of Baltimore announced yesterday that it has agreed to buy Sullivan Broadcast Holdings Inc. in an acquisition that could be worth as much as $1 billion.

The deal, which is expected to be completed by late spring, gives a further boost to Sinclair's rising profile in the radio and television broadcasting industry. It brings Sinclair 14 new television stations and increases the company's television market coverage to 23 percent of American households.

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Perhaps most important, the deal strengthens Sinclair's position as an owner of Fox network affiliates. Of Sullivan's 14 stations, 10 are with Fox, giving Sinclair a total of 24 Fox affiliates.

"There are a lot of strategic benefits of the deal. We cement our position as the top Fox affiliate group behind Fox itself," said Sinclair Director of Corporate Finance Patrick Talamantes.

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Owning so many stations in a single network will give Sinclair market muscle, analysts said. "They get more leverage with Fox, and they get more leverage with program syndicators," said analyst Harry J. DeMott at Credit Suisse First Boston in New York. According to Jessica Reif Cohen of Merrill Lynch & Co. in New York, Sinclair will profit from hitching its star tightly to the Fox wagon. "Fox is a network that's still up-and-coming, still growing," she said.

The acquisition also fits Sinclair's traditional strategy of going after stations in medium-size markets. With the purchase of Sullivan, Sinclair will gain stations in Oklahoma City; Nashville, Tenn.; Dayton, Ohio; and other middle-tier cities.

In two markets -- Buffalo, N.Y., and Greensboro/Winston-Salem/High Point, N.C., -- Sinclair will gain a television station where it already has a radio station, adding to the company's market influence in those areas.

Paul Sweeney, an analyst at Solomon Smith Barney Holdings Inc. in New York, said of Sullivan, "Strategically, this company really fits like a glove for Sinclair."

Sinclair will pay between $950 million and $1 billion for Boston-based Sullivan. The ultimate figure will be based on a forecast of Sullivan's cash flow, the measurement of earnings before interest, taxes, depreciation and amortization. Cash flow is a key yardstick of financial health in the broadcasting industry.

Sinclair Chief Financial Officer David Amy said Sullivan's cash flow for this year is currently projected to be $78 million, but the final forecast won't be made until June 30.

Sinclair's broadcast cash flow was $243.3 million in 1997, up 29 percent over the previous year.

Sinclair will pay for Sullivan primarily in cash, but it has the option of using its own shares to cover up to $100 million of the cost. In addition, the purchase price could include Sinclair's assumption of up to $480 million in debt, though Amy said the actual amount of debt assumed will probably be closer to $160 million.

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To help finance the purchase, Sinclair will issue debt and equity securities in March or April.

Sullivan Executive Vice President David Pulido said his company had been approached by other broadcast groups that he declined to identify, but that Sinclair had presented Sullivan with the most attractive package. "It represented a good opportunity for our shareholders to realize significant gains," he said.

ABRY Partners Inc., a Boston investment partnership, currently owns more than 60 percent of closely held Sullivan.

The deal is subject to Federal Communications Commission and Department of Justice approval.

The purchase of Sullivan is the latest in a string of station buys for Sinclair, which is undergoing a growth spurt. Including the Sullivan acquisition, Sinclair owns, programs or has agreements to acquire 55 television stations in 37 markets, along with 59 radio stations in 11 markets.

Talamantes said, "We continue to see ourselves making acquisitions where we can pick up nice, strategic markets. It's an exciting time here." Shares in Sinclair closed at $55.25, down 62.5 cents, on the Nasdaq stock market.

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Pub Date: 2/25/98


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