TV Station Transactions Could Boost LIN’s Value, CEO Says
With several TV stations and groups potentially for sale, a batch of transactions (CD July 19 p9) could provide investors with a better sense of what LIN Media’s assets are worth and boost its share price, CEO Vincent Sadusky said on the company’s Q2 earnings teleconference. “It’s terrific for everyone associated with the industry that we're going to have some competitive valuation marks, hopefully, as some of these transactions are consummated.” Valuations could be higher than in recent years, he said: “Whether we're a buyer or seller is just going to take place on deal by deal basis.” Even if LIN doesn’t buy or sell any station, it will benefit as stations are sold at higher valuations, he said. “If it doesn’t work for us, we're OK with that. That means these assets will be selling for a premium to our public market value, and that’s a very good thing."
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The industry has traditionally high free cash flow, is developing a recurring revenue stream from retransmission consent and is in the process of setting the market for reverse network compensation, Sadusky said: “A lot of the challenges that potential investors were concerned about over the year are not as significant unknowns as they were.” He said existing broadcasters have a leg up over financial buyers when it comes to making deals, because they can benefit from synergies in retransmission consent contracts and other areas.
Consolidation would help broadcasters, Sadusky said: “We think scale will make this business more effective than it is today” and give stations more leverage with programming suppliers and pay-TV distributors.
Sadusky said LIN and the industry’s main goal in Washington now is to protect stations’ existing service areas if Congress authorizes the FCC to hold incentive spectrum auctions. (See separate story in this issue.) “It’s an industry-wide lobbying effort to just ensure that what ultimately gets passed, if anything gets passed with regard to spectrum in this session, that we get the best protection we can possibly have in terms of ensuring our coverage areas are not reduced,” Sadusky said. He said it’s “very hard to say” whether to expect spectrum auction authorizations to be included in deficit reduction bill. That’s driven a lot of legislative activity “that otherwise would probably take more time to be contemplated,” he said. “If you are at the bill stage, then there is the possibility for something to get passed."
Q2 sales at LIN gained 5 percent from a year earlier to $104.1 million on a 50 percent jump in digital revenue, which includes retrans fees. Profit dropped 70 percent from a year earlier to $1.07 million, reflecting a one-time gain in the year-earlier period.