Shares of Tribune Media Company (NYSE:TRCO) gained more than 6.4% in morning trading after Sinclair Broadcast Group (NASDAQ:SBGI) —the nation’s largest broadcaster—announced that will acquire the company in deal worth nearly $4 billion.
Tribune Media shares were up $2.61 to $42.90 in morning trading, while Sinclair shares gained $1.28 to $38.23.
Sinclair will pay roughly $43.50 per share for Tribune Media and assume about $2.7 billion in net debt from the deal. Sinclair, which currently owns 173 channels, reaches more than 38% of the nation. Tribune Media operates 42 stations and reaches more than 43% of the nation.
“The Tribune stations are highly complementary to Sinclair's existing footprint and will create a leading nationwide media platform that includes our country's largest markets,” said Sinclair CEO Chris Ripley.
Technically, the Federal Communications Commission mandates that a media company can only own multiple TV stations if its nationwide market share does not exceed 39%. Tribune Media reached the 43% mark after receiving an exemption to buy 19 stations from Local TV LLC in 2013.
The FCC recently eased these regulations, reversing a rule about how market reach of UHF channels is calculated last month. According to Bloomberg Intelligence, Sinclair and Tribune Media should be able to keep their combined market share low enough with a few divestitures.
Sinclair reportedly beat out a combined offer from 21st Century Fox (FOXA) and private-equity firm Blackstone (NYSE:BX). Financial Times said last week that the two companies were working on a joint deal in an effort to fend off Sinclair (also read: Tribune Media Stock Spikes on Joint 21st Century Fox-Blackstone Bid).
Wells Fargo (NYSE:WFC) analyst Marci Ryvicker said that today’s deal was done at a “very attractive” multiple and is “clearly accretive” to free cash flow.
Sinclair is currently a Zacks Rank #4 (Sell), while Tribune Media is a Zacks Rank #3 (Hold).
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Sinclair Broadcast Group, Inc. (SBGI): Free Stock Analysis Report
Tribune Media Company (TRCO): Free Stock Analysis Report
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