Sinclair, a major proprietor of broadcast stations in the United States, is reportedly contemplating the sale of over 30% of its network, as disclosed by sources familiar with the situation.
Engaging Moelis as its investment advisor, the corporation has earmarked upwards of 60 stations across various U.S. regions for potential sale, insiders, who preferred anonymity due to the confidential nature of the discussions, revealed. Sinclair presently holds ownership or operational control over 185 TV stations spanning 86 markets.
These stations encompass a variety of affiliations, including Fox, NBC, ABC, CBS, and the CW. When considered collectively, their projected average revenue for the years 2023 and 2024 stands at approximately $1.56 billion, the sources added. Sinclair is open to divesting either all or a portion of these stations, which are situated in prime markets such as Minneapolis, Portland (Oregon), Pittsburgh, Austin (Texas), and Fresno (California), among others.
Sinclair's CEO, Chris Ripley, indicated during the company's recent earnings conference call that they are amenable to shedding segments of their business, although specifics were not provided.
"As we’ve always stated, we have no sacred cows," Ripley remarked. "We want to unlock the sum of the parts valuation that we think we’re grossly undervalued for. And to the extent that asset sales makes sense in order to unlock that value and help us de-lever, then that’s something that we’d be open to as well."
The process of officially seeking buyers commenced in February, as per one of the insiders.
Representatives for Sinclair and Moelis declined to offer any comments on the matter.
Additionally, Sinclair is purportedly exploring strategic alternatives for its Tennis Channel, a cable television network featuring tennis and pickleball matches, according to the sources. This development was initially reported by Bloomberg.
Over the past five years, broadcast TV station groups have faced challenges, with millions of Americans opting out of traditional pay TV services. The primary revenue stream for most stations comes from retransmission fees, which are paid by traditional TV distributors such as Comcast, DirecTV, and Charter on a per-subscriber basis for the right to carry these stations.
Sinclair's market value has plummeted by more than 70% over the past half-decade. Presently, the company's market capitalization hovers around $975 million, with an enterprise value of approximately $4.7 billion.
Sinclair changes
Last year, Sinclair underwent a rebranding and restructuring endeavor, dividing its operations into two distinct units — Local Media, which concentrates on the stations, and Ventures, tasked with managing Tennis Channel while also serving as a potential investment platform.
The internal division within Sinclair, along with the recent initiative to sell off certain stations, is reportedly rooted in tensions among the Smith family, longstanding shareholders, and board members who played pivotal roles in the company's development, according to informed sources.
The decision to offload stations comes amidst the months leading up to the 2024 election, a period typically associated with heightened political advertising revenue for broadcast TV entities. Sinclair disclosed during its earnings briefing on Wednesday that it had secured $77 million in political advertising bookings for the latter half of the year, leading up to Election Day. This figure marks a substantial increase from the $21 million recorded at the equivalent stage in 2020, during the previous presidential election featuring former President Donald Trump and President Joe Biden.
During the first quarter, Sinclair observed modest upticks in both overall revenue and advertising revenue. Consequently, Sinclair's stock experienced a 12% surge on Thursday.
Notorious for its conservative editorial stance, Sinclair's broadcast stations garnered controversy in 2018 following a directive that compelled certain stations to air promotional segments critical of the media's coverage of "fake stories."
Diamond woes
The move follows a period of turbulence for Sinclair in the regional sports networks sector.
Back in 2019, Sinclair made headlines with its acquisition of the largest array of regional sports networks from Disney, a deal valued at $10.6 billion, with $8.8 billion of that amount shouldered as debt. However, the combination of escalating cord-cutting trends and the substantial debt burden took its toll, leading Diamond Sports, the independently operated subsidiary under Sinclair's umbrella, to file for bankruptcy protection last year.
Subsequently, Diamond initiated legal action against its parent company Sinclair, leading to a resolution in January. Sinclair agreed to a $495 million settlement to resolve the litigation stemming from Diamond's grievances.
