(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)
By Jeffrey Goldfarb
NEW YORK, May 15 (Reuters Breakingviews) – Sinclair Broadcast may be pulling off the defining deal of the nascent Trump era.
The Baltimore-based owner of 173 television stations unveiled a plan last week to buy Chicago rival Tribune Media for $3.9 billion. It’s a transaction made possible in large part because of regulatory rollbacks. Ajit Pai, the new Federal Communications Commission chairman, relaxed media ownership rules by changing the way national broadcast coverage is calculated, thus clearing the way for Sinclair’s expansion.
When announcing the Tribune purchase, $3.3 billion Sinclair also was cagey about the financial benefits. Companies typically tout specific cost savings – often linked to job cuts – achievable as a result of an acquisition to help justify the premium, in this case 26 percent more than Tribune’s undisturbed share price.
Instead, the press release focused primarily on the “transformational” and “complementary” nature of the acquisition. A separate presentation for investors makes mention of “substantial” synergies from a variety of areas, including “redundant personnel” as relates to corporate overhead. There is also the promise of “facility and staff combinations in overlap markets” yielding “significant” savings. During a call with analysts, however, Sinclair Chief Executive Christopher Ripleydemurred when asked to quantify the sums involved.
Finally, the Sinclair merger should especially suit the TV-watcher-in-chief. President Donald Trump is often glued to the screen and reacts to what he sees using social media. What’s more, Sinclair stations scored interviews with him during the campaign as part of an arrangement struck with the president’s son-in-law, Jared Kushner, for better coverage, Politico reported. Sinclair also forces its 42 local affiliates to air conservative-leaning segments, according to a weekend New York Times article. And the company conceivably could recruit Bill O’Reilly, the popular host recently ousted from Trump’s preferred network, Fox News.
Not every CEO can do a deal in an industry so befitting the president, though there may well be tie-ups in real estate, fast food and even one involving Twitter during his term. Many bosses, however, are counting on more government leniency and tax cuts to motivate acquisitions. Renewed discussions between Sprint and T-Mobile US are a case in point. Companies also will be reluctant to talk up any big merger-related cost cutting, for fear of attracting the attention of the jobs-obsessed president. For the time being, though, Sinclair’s M&A efforts hold the title of Trumpiest.
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– Sinclair Broadcast Group said on May 8 that it had agreed to buy Tribune Media for $3.9 billion. Sinclair will also assume $2.7 billion of Tribune debt. Tribune shareholders will receive $35 in cash and 0.23 of a share of Sinclair class A common stock for each share of Tribune class A and class B stock they own, totaling $43.50 per share.
– The total represents a premium of 26 percent over Tribune’s closing price on Feb. 28, 2017, the day before media reports first broke about a possible transaction.
– Tribune owns or operates 42 TV stations in 33 markets in the United States as well as cable network WGN America and has minority stakes in the Food Network and CareerBuilder. Buying Tribune will give Sinclair a total of 233 owned or operated television stations in 108 markets before any divestitures that may be required by U.S. regulators, which have to approve the deal.
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(Editing by Rob Cox and Kate Duguid)