Why Is Sinclair Broadcast Group Inc (SBGI) Buying Tribune Media Co (TRCO)?


Sinclair Broadcast Group Inc (NASDAQ:SBGI) has agreed to acquire Tribune Media Co (NYSE:TRCO) for around $3.9 billion.

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Sinclair CEO Chris Ripley said that “this is a transformational acquisition” that will “open up a myriad of opportunities” for Sinclair.

Tribune owns 42 television stations in 33 markets, including FOX, CBS, ABC, and NBC. The company also operates cable network WGN America, digital multicast network Antenna TV, minority stakes in the TV Food Network and CareerBuilder, and a variety of real estate assets.

These “stations will create a leading nationwide media platform that includes our country’s largest markets,” Ripley said, adding that the acquisition will enable his company “to build ATSC 3.0 (Next Generation Broadcast Platform) advanced services, scale emerging networks and national sales, and integrate content verticals.”

To comply with the Federal Communications Commission’s ownership requirements and antitrust regulations, Sinclair may sell certain stations in markets where it currently owns stations. “Such divestitures will be determined through the regulatory approval process,” the company said in a statement.

Sinclair’s Offer to Buy Tribune

Under the agreement, Sinclair will acquire 100% of the issued and outstanding shares of Tribune for $43.50 per share.

Tribune stockholders will receive $35.00 in cash and 0.23 shares of Sinclair Class A common stock for each share of Tribune Class A common stock and Class B common stock they own.

The boards of directors of both companies approved the deal. Now it requires a clearance from Tribune’s stockholders.

Sinclair Broadcast Group Inc (NASDAQ:SBGI) expects to fund the acquisition through a combination of cash on hand, debt financing, and by accessing the capital markets. Debt financing will be provided by JPMorgan Chase Bank, Royal Bank of Canada, Deutsche Bank AG New York Branch and Deutsche Bank Securities, according to the company.

The acquisition is expected to close in the fourth quarter of 2017, subject to customary closing conditions, including approval by the Federal Communications Commission and antitrust clearance.

J.P. Morgan Securities acted as exclusive financial advisor, while Fried, Frank, Harris, Shriver & Jacobson, Pillsbury Winthrop Shaw Pittman and Thomas & Libowitz served as legal advisors to Sinclair.

Moelis & Company and Guggenheim Securities acted as financial advisors while Debevoise & Plimpton and Covington & Burling were legal advisors to Tribune.

Shares of Sinclair Broadcast Group Inc (NASDAQ:SBGI) were down 2.23% on Monday in the extended trading session. The stock is up over 8% so far this year.

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