With the last broadcast transaction of the year — a $55.8 million TV deal — the broadcast deal volume for 2020 passed the $1 billion line, closing with a total of $1.02 billion.
That’s an 87% drop from 2019, Volker Mörbitz of S&P Global Market Intelligence notes, clearly highlighting the challenges of the COVID-19 pandemic.
It is, however, a volume 27% higher than that of 2010 when the deal market felt the full impact of the 2008-2010 financial crisis.
Mörbitz took stock of the largest transactions of 2020 for the broadcast TV industry. And, this included transfers of majority control.
As such, Univision’s rebirth under Wade Davis ranks as the largest transaction of the year.
In February 2020, Davis’ Searchlight Capital Partners LP and ForgeLight LLC agreed to acquire a 64% stake in Univision Communications from Saban Capital Group LLC and other investors who got in right before the severe economic downturn of the late 2000s.
Based on the estimates for Univision’s 2020-2021 average cash flow, Kagan values Univision’s 58 radio stations at $408.3 million and its 52 TV stations at $3.48 billion.
Mörbitz says that represents 52.3% of the station value estimated for the Saban Capital Group Inc. buyout in 2006.
However, it is important to note that S&P Global Market Intelligence does not include partial transactions in its summaries.
With 64% of our estimate of Univision’s broadcast assets is $2.49 billion, this wasn’t added to the annual deal volume S&P measures.
When factor into the mix, the 2020 broadcast deal market would have closed with a total of
$3.51 billion. This, Mörbitz says, would be 45% of 2019’s volume.
HERE COMES COVID-19
In March 2020, the deal market nearly came to a complete halt. Between March and June, the lone notable deal was the sale of three TV stations from Marshall Broadcasting to Mission Broadcasting, a partner of Nexstar Media Group.
This transaction, which involves three TV stations licensed to Pluria Marshall that ended up under federal bankruptcy protection, was valued at $49 million.
Without this transaction, Mörbitz says April would have registered a deal volume of only $9.3 million; the deal volume of March, April, May and June combined would have been lower than that of January. May registered a total of $12.1 million — the lowest monthly deal volume in Kagan records dating back 35 years.
In July, deal volume received a boost from a transaction that was 16 months in the making.
In March 2019, as part of the spinoffs following the merger with Tribune Media Company, Nexstar sold eight TV stations to The E.W. Scripps Co. The sale included the option for Nexstar to buy back one of the stations, The CW affiliate WPIX-11 in New York. In July 2020, Nexstar announced that it had transferred that option to its partner Mission Broadcasting, which had exercised the option for $75 million plus accrued interest.
In August, a subsidiary of Byron Allen’s Entertainment Studios Inc. announced the $30 million purchase of three Hawaiian TV properties all tied to ABC affiliate KITV-4 in Honolulu from the Lilly family’s SJL Broadcast Management Corp.
The largest transaction of the second half of the year — and the largest announced during the pandemic — took place in September, when Scripps paid a total of $2.65 billion for all of ION Media. “We estimated an 8.7x forward seller’s multiple for ION’s 71 TV stations, which led to a station value of $338.0 million,” Mörbitz notes.
In October, newly merged Scripps/ION announced the spinoff of 23 stations to comply with duopoly regulations. The buyer, INYO Broadcast Holdings LLC, was formed by investment firm Methuselah Advisors LLC, which in recent years had been the financial advisor in three acquisitions carried out by Scripps. INYO’s stations will continue broadcasting the ION format. The deal is valued at $30 million.
Together, the sale and the subsequent spinoff of the ION stations stand for 46% of the broadcast deal volume of the second half of 2020.
Yet, November brought two large TV station deals. For $35 million or 7.5x forward seller’s broadcast cash flow, HC2 Holdings announced the agreement to sell three DTV stations and one translator — all Azteca América O&Os — in the markets of Dallas, Houston and Phoenix to MeTV Network parent Weigel Broadcasting Co.
In the Paducah, Ky.-Cape Girardeau, Mo.-Harrisburg, Ill. market, Sinclair Broadcast Group agreed to sell FOX affiliate KBSI-TV and MyNetworkTV outlet WDKA-TV to Community News Media LLC for $28 million. This translates to a 7.2x multiple, Kagan data show.
In the last large deal of the year, announced Dec. 31, the membership interests of Standard Media Group LLC will be transferred from Deb McDermott-led McDermott Communications LLC to Paducah Television Operations LLC.
The transfer affects ABC affiliates KLNK-TV in Nebraska’s Lincoln-Hastings-Kearny market and WLNE-6 in the Providence, R.I.-New Bedford, Mass. market.
McDermott will receive a $55.8 million amended and restated floating rate subordinated convertible note. “In our estimates, that brings the forward broadcast cash flow multiple for the two stations to 7.5x,” Moerbitz says.
The average forward seller’s TV cash flow multiple for 2020, excluding the partial Univision buyout, comes to 8.5x.
This number, he adds, represents a straight average driven by the 8.7x above-average multiple of the 65 cash flow stations in the ION Media sale. The other 10 cash flow TV stations sold in 2020 registered multiples between 7.2x and 9.1x.
“Using a weighted average in which every individual deal is taken into consideration but not every individual station, the 2020 average TV cash flow multiple would be 7.9x,” Moerbitz says. “Aside from the Univision buyout and the ION sale, only 20 radio and 10 TV stations were sold for cash flow values. This is the lowest number of cash flow TV stations outside of large consolidation deals sold since 2009.”
