Broadcast M&A Said Likely to Stay Slow
Big TV groups remain interested in buying other ones, but opportunities are rare and purchases of individual stations in full-power TV and radio are at a crawl, said analysts, broadcasters and brokers in recent interviews. “All the low-hanging fruit has been picked,” said S&P Global analyst Volker Moerbitz. With the industry consolidated and ownership rules unlikely to loosen, that likely won’t change soon, said BIA Advisory Services Chief Economist Mark Fratrik: “It’s a natural evolution.”
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In 2021, outside of large “consolidation” deals involving Gray Television, 15 TV stations were sold for a total of $70 million, Moerbitz said. At one time, the same amount would have been sold in a quarter, he said, conceding he saw similar numbers even before this pandemic. Between January and August 2019, 12 stations sold for $202 million outside large transactions. “Conclusion: the TV deal market is almost entirely driven by big consolidation,” Moerbitz emailed. Consolidation deals don’t provide much information on what the actual market is for TV stations because they generally involve the purchase of an entire company, with low-performing stations purchased alongside more profitable ones, Moerbitz said.
Large mergers and acquisitions are still occurring, but the possible buyers and sellers in such arrangements decrease with each sale, Moerbitz said. Gray is in “digestion mode” from deals for Quincy Media and Meredith, said Patrick Communications media broker Gregory Guy. “We’re plenty busy with what we’ve already announced,” said Gray co-CEO Pat LaPlatney on a recent panel (see 2109230073).
Most companies that own large numbers of stations are either very close to the 39% ownership cap (Gray, Nexstar, Sinclair, E.W. Scripps) or are top-four networks and so unlikely to sell (Comcast, Fox), said Moerbitz. That leaves groups such as Hubbard, Weigel or Tegna. Hearst Television President Jordan Wertlieb last week said his company would be a buyer for the right assets. “There’s a not a tremendous amount to be done,” said Guy.
Tegna has seen some activity on a possible sale, analysts noted. The company last week said it had received overtures: “Consistent with its fiduciary duty to TEGNA shareholders, the Board will carefully review and evaluate these proposals.” Those proposals reportedly came from Allen Media and Apollo Global Management. The three companies involved didn’t confirm that. Tegna endured a proxy fight earlier this year (see Ref:2105060069) with Standard Media that partially concerned the current leadership not being receptive to acquisition offers. Allen Media CEO Byron Allen says he’s looking to spend billions of dollars on buying network TV stations.
Radio station buying and selling is slow, but industry watchers told us it's in a more difficult position than TV. “The industry has yet to rebound from the pandemic,” said Fratrik. “It’s not clear how to value a radio station in the current advertising climate,” said Guy. Banks are hesitant to provide financing for radio deals, said Moerbitz.
“Not a lot of groups are in position for aggressive growth,” Guy said. Between January and August, 303 full-power radio stations sold for $113 million, said Moerbitz. “That is -- in terms of deal volume -- less than 20% of what we had pre-COVID.” Bigger M&A in radio in recent years is widely seen as having been a negative for the buyer, such as Audacy’s (then-Entercom’s) buy of CBS radio stations.
"The economy is good and interest rates are low," which would ordinarily make this an attractive time to acquire stations, Fratrik said. “With interest rates this low, almost everything is worth more than the current selling price,” emailed media broker Frank Kalil. Looser ownership rules would likely stimulate more consolidation, but they’re not considered likely to change with the current FCC administration, said Fratrik. Relaxed rules “would loosen things up” and drive another round of buying and selling, but there are no signs of coming deregulation, Guy said.
The LPTV market, which doesn’t have ownership caps, is experiencing a lot of deal activity, Guy said. With the repacking over, LPTV stations are less likely to be bumped from their signal by a full-power station, and making money with an LPTV station has become easier due to the rise of digital subchannels and the prospects of ATSC 3.0, he said. Since LPTV outlets are much cheaper than their full-powered cousins, the increased rate of transactions doesn’t translate to a large amount of money changing hands, Fratrik said.