Friday , May 24 2019

Sinclair to buy Disney’s 21 Fox sports networks in $9.6b deal

Bloomberg

Sinclair Broadcast Group Inc. will buy 21 Fox regional sports networks from Walt Disney Co. for $9.6 billion, a bet that the local-TV company can become a cable-sports powerhouse.
Sinclair will acquire the business via a new subsidiary called Diamond Sports Group, the company said. Byron Allen, the former comedian who founded Entertainment Studios and owns the Weather Channel, is investing in the business and will help supply content.
Investors applauded the transaction, sending Sinclair shares up as much as 16 percent in late trading. Even before the surge, the stock had gained 71 percent this year.
Disney agreed to sell the networks as part of its already-completed acquisition of 21st Century Fox Inc.’s entertainment assets. That attracted a varied cast of suitors, including John Malone’s Liberty Media Corp., which teamed up with Major League Baseball, and Ice Cube’s Big3 US basketball league. The entertainer lined up Will Smith, Serena Wil-liams and Snoop Dogg as content partners for his unsuccessful bid.
The networks have about 74 million subscribers and generated $3.8 billion in revenue last year.
The have local broadcast rights to 42 professional teams, including Major Lea-gue Baseball, National Basketball Association and National Hockey League squads.
“While consumer viewing habits have shifted, the tradition of watching live sports and news remains ingrained in our culture,” Sinclair Chief Executive Officer Chris Ripley said in a statement. “As one of the largest local news producers in the country and an experienced producer of sports content, we are ideally positioned to transfer our skills to deliver and expand our focus on greater premium sports programming.”

DEBT DEAL
Sinclair expects to put $1.4 billion cash into the new Diamond business. The rest will be funded by $8.2 billion in debt and $1 billion in privately placed preferred stock, Sinclair said. The total enterprise value will be $10.6 billion.
The company’s advisers included Guggenheim Securities, Deutsche Bank and RBC Capital Markets, with Disney relying on Allen & Co. and JPMorgan Chase & Co. JPMorgan, Deutsche Bank and RBC will help supply the financing.
Sinclair has been one of the broadcast industry’s most acquisitive companies for years, but this marks an aggressive push into sports. It previously focused more on collecting local stations, at one point becoming the dominant company in that area.
More recently, its rivals have grown more formidable. Nexstar Media Group Inc. agreed to buy Tribune Media Co. for about $4.1 billion in December, vaulting it past Sinclair as the largest owner of TV stations in the US.
The Fox sports networks give Sinclair a major foothold in cable TV, and the kind of live programming that appeals to advertisers. The channels serve cities such as Los Angeles, Atlanta and Detroit, with games from major pro leagues.
Sinclair already owns some other sports assets, including the Tennis Channel and the Ring of Honor wrestling circuit.
“This acquisition is an extraordinary opportunity to diversify Sinclair’s content sources and revenue stre-ams with high-quality ass-ets that are driving live viewing,” Ripley said.

REGULATORY HURDLE
The transaction allowed Disney to get antitrust approval for its $71 billion Fox takeover, a transaction that closed earlier this year. Regulators were concerned that the company would have too much control over sports television if it owned both ESPN and the regional broadcasters.
Disney had to sell the networks within 90 days of the Fox deal’s completion in mid-March.
The New York Yankees decided to buy back their network from the group, removing a crown jewel that’s valued at about $4 billion.
And several deep-pocketed potential suitors, including Comcast Corp., Discovery Inc. and the new Fox Corp. itself, bowed out of contention for the remaining networks.

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