* Tribune purchasing Local TV from Oak Hill Capital Partners
* Deal would make Tribune the largest U.S. TV broadcaster
* Tribune not ruling out other TV station purchases
* Tribune shares up 6.6 percent
(Adds executive comments from call, more details on the deal)
By Jennifer Saba and Greg Roumeliotis
July 1 Tribune Co said on Monday that
it would acquire 19 television stations from Local TV Holdings
LLC for $2.73 billion in cash, making it the largest TV
broadcaster in the United States.
The purchase from New York private equity firm Oak Hill
Capital Partners is another step for Tribune, the publisher of
the Los Angeles Times and the Chicago Tribune, in transforming
itself largely to a broadcast company as it seeks to sell off
its newspaper division.
Tribune, which currently has 23 television stations and
eight newspapers, emerged from bankruptcy protection in
With Local TV, Tribune will now have stations in large
markets like New York, Los Angeles, Miami, Cleveland, Denver and
Seattle and will reach the most households in the United States.
Its shares were up 6.6 percent at $60.65 on the pink sheets
in afternoon trading.
The purchase is especially important for its WGN America, a
national feed of its Chicago TV stations that it repackages as a
superstation and distributes through cable and satellite to more
than 76 million homes.
Besides advertising revenue, TV stations get retransmission
fees from cable companies looking to broadcast their programs on
"Retrans is a growing stream of revenue," said Benchmark Co
analyst Edward Atorino. "Internet revenue a few years ago was
peanuts; now it's getting into tens of millions of dollars.
Mobile TV revenue is on the horizon."
Tribune Chief Executive Officer Peter Liguori said the deal
"clarifies and accelerates Tribune's strategy for growth."
On a conference call, Liguori did not rule out other TV
acquisitions, noting the pace of merger activity in the sector.
"We continue to look at broadcast stations that come up and
are available," he said.
Tribune executives said that with the deal, they
anticipated $3.5 billion in total company revenue and $1.1
billion in earnings before interest, taxes, depreciation and
amortization this year. Local TV alone should generate more than
$100 million within five years, they said.
Tribune is the latest company to snap up local TV stations
as the industry consolidates. Last month, Gannett Co,
the largest U.S. newspaper chain, announced a deal to buy Belo
Corp and its 20 local TV stations for $1.5 billion.
Allbritton Communications, the publisher of Politico, said
it was putting its group of eight TV stations up for sale.
"Clearly there is a belief out there that TV stations are
here to stay despite some skeptics," Benchmark's Atorino said.
Tribune's broadcast stations reported in 2012 revenue of
$1.1 billion, more than a third of the company's total $3.1
Tribune's big broadcast buy also prompted questions about a
possible sale of its newspapers assets. They have attracted a
flurry of interest from potential buyers, including two of the
world's richest men, Charles and David Koch, who are known for
their conservative views. [ID: nL1N0C4H73]
"We are looking at all our strategic options when it comes
to newspapers," Liguori said. "I'm an operator, and we are going
to operate newspapers at the highest levels possible. M&A is our
night job; we know what our day job is."
Tribune has not officially begun the sale process for its
newspapers, but it is making internal preparations, including
the drafting of market materials, according to a second source
familiar with the company.
The Local TV sale will bring Oak Hill the biggest dollar
profit in its 27-year history, with a gain of $1.2 billion on
its initial investment, according to a person familiar with the
Oak Hill bought nine network-affiliated TV stations from New
York Times Co for $575 million in 2007 and eight Fox
network-affiliated stations from 21st Century Fox for
about $1.1 billion in 2008. These deals include equity and debt
used to finance the purchases.
Oak Hill invested in Local TV across two of its funds. One
of them stands to make 3.7 times its investors' money on the
deal, and other stands to make 3.4 times, the source said. The
private equity firm declined to comment on its investment
Tribune said it had received financing of up to $4.1 billion
from JPMorgan Chase & Co, BofA Merrill Lynch,
Citigroup Inc, Deutsche Bank AG and Credit
Suisse Group. This includes a new $300 million
revolving credit facility and the capacity to refinance existing
Guggenheim Securities was a financial advisor to Tribune.
Moelis & Co, Wells Fargo Securities, and Deutsche Bank
Securities were financial advisors to Local TV.
(Reporting by Sayantani Ghosh in Bangalore and Jennifer Saba
and Greg Roumeliotis in New York; Editing by Saumyadeb
Chakrabarty and Lisa Von Ahn)