Tribune Company (TRBAA) Looks Interesting With the Acquisition of TV Stations

How about Gannett Co., Inc. (NYSE:GCI) and Sinclair ?

Tribune’s peer Gannett Co., Inc. (NYSE:GCI) also expanded its footprint in the broadcasting business by acquiring Belo Corp (NYSE:BLC) for around $2.2 billion. With the Belo Corp (NYSE:BLC) acquisition, Gannett Co., Inc. (NYSE:GCI) could nearly double its broadcast assets, making it the fourth largest owner of the major network affiliates, reaching around 30% of the total U.S. television households. The annual run-rate synergies could reach $175 million, spreading over three years after the deal is closed.

Including three-year run-rate synergies, the pro forma EBITDA was only 5.4, suggesting a sweet deal for Gannett. Gannett is trading at around $26 per share, with the total market cap of $5.95 billion. The market values Gannett  at only 6.5 times its trailing EBITDA. Its dividend yield is quite decent at 3.1%. The company mentioned that it would maintain its dividend and could return around $300 million in cash to shareholders via share repurchases.

is also one of the top three largest major network affiliate owners with the coverage of around 34% of the total U.S. television households, 134 TV stations in 69 markets and four radio stations. Around 37% of its net broadcast revenue derived from FOX. Currently, as much as 85% of its total revenue came from ads while the retransmission revenue took only around 9% of the total 2012 revenue.

Sinclair Broadcast Group, Inc. (NASDAQ:SBGI) would like to re-balance those two revenue percentage shares. Three years later, Sinclair Broadcast Group, Inc. (NASDAQ:SBGI) estimated that its ad revenue accounted for 77% of the total revenue while the retransmission revenue share increased to 16%.

It is trading at $31.80 per share, with the total market cap of $2.6 billion. The market values Sinclair quite expensively, at 10.6 times its trailing EBITDA. The dividend yield stays at 2%.

My Foolish take

Indeed, the acquisition of Local TV would boost Tribune’s revenue, free cash flow and earnings significantly. An expected $500 million in free cash flow could allow the company to initiate near-term dividend payments or share repurchases. According to Barron’s, Imperial Capital has raised its price target for Tribune, from $63.25 to as high as $76 per share.

Anh HOANG has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Anh is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article Tribune Looks Interesting With the Acquisition of TV Stations originally appeared on Fool.com is written by Anh HOANG.

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