Tribune Co. said Monday that it reached a deal to buy Local TV Holdings LLC's 19 TV stations for $2.73 billion in cash, significantly boosting its television business as it looks to sell its newspaper operations.
Tribune currently owns 23 TV stations and cable network WGN America, along with the Chicago Tribune, Los Angeles Times and other newspapers. The deal will give it 42 stations, making the Chicago-based company one of the nation's top TV station owners. Tribune said it will be the No. 1 commercial TV station group in the country based on its broadcast reach into more than 50 million homes.
The deal reshapes the broadcast media landscape and follows two recent broadcast acquisition deals by companies whose roots are in newspapers. These companies are trying to acquire additional television stations at a time when the newspaper industry is faltering.
Last month, Gannett Co., the publisher of USA Today, announced plans to buy TV station owner Belo Corp. for about $1.5 billion. The acquisition will nearly double Gannett's portfolio of stations from 23 to 43, reaching nearly one-third of U.S. households. The company said the deal will give it access to what it said are some of the fastest-growing television markets, including Dallas, Houston and Seattle.
Just a week earlier, Media General Inc. and New Young Broadcasting Holding Co. announced plans to combine into a company that will operate 30 TV stations in 27 markets including San Francisco, Nashville, Tenn., and Richmond, Va. That came after Media General sold all its newspapers last year to focus on broadcasting.
There are several reasons why broadcast stations are increasingly attractive. For one, they offer companies more opportunities to sell increasingly lucrative political-campaign ads in battleground markets. Another plus: The more stations a conglomerate owns, the more clout is has when negotiating the fees that cable and satellite TV companies pay to include broadcast stations on customers' lineups.
Tribune cited those factors, as well as its potential to maximize its national and local advertising sales, while acquiring more outlets to distribute its video and digital content.
"Our investment thesis is simple. Scale matters," Tribune Co. President and CEO Peter Liguori said in a conference call with analysts.
The company said it expects the deal to boost its profits immediately and result in more than $100 million in annual cost savings within five years. Local TV's holdings include stations in Denver, Cleveland, St. Louis and other major cities. Markets served by Tribune include Chicago, New York, Los Angeles, Philadelphia and Seattle. Tribune also has one radio station, WGN-AM in Chicago. Tribune will be getting seven additional Fox stations and five more CBS affiliates through the deal.
Tribune is trying to sell its newspapers to focus on its more profitable broadcasting operations. The newspaper sale is being done at the behest of a group of lenders that took over the company as part of a bankruptcy reorganization.
The newspapers have been hurt by a shift that has driven more readers and advertisers to the Internet and mobile devices. The downturn in print advertising was one of the factors that caused Tribune to file for Chapter 11 bankruptcy protection in 2008. It emerged from court oversight at the end of 2012.
Local TV is principally owned by private equity firm Oak Hill Capital Partners.
The Tribune deal, which remains subject to antitrust and Federal Communications Commission approvals, is expected to close by the end of 2013. Tribune Co. said it has received committed financing of up to $4.1 billion and expects the deal will be financed through a combination of debt financing and cash on hand.