Allbritton Could Fetch More Than $900 Million

The station group that went on block last week should attract top dollar because of its flagship, ABC affiliate WJLA Washington. It's been a long time since a network affiliate in a top 10 market of that caliber has become available. Potential buyers include ABC and the usual suspects headed by Sinclair.

In the wake of Allbritton Communications' decision to put itself up for sale, two core questions emerge: Who are the likely buyers and how much will the company fetch?

Second question first. Some analysts think the group could go for something approaching $1 billion.

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"Allbritton's timing in coming to market is excellent," says Michael Alcamo, president of the M&A advisory firm M.C. Alcamo & Co. "By seeking a sale in the summer, the company gets full credit for the strong political spending in 2012, blended with 2011.

"Moreover, the transaction is catching a rising tide in the M&A market.  We expect a multiple of 10x the average aggregate [broadcast cash flow] for 2011-12." 

Albritton's average blended 2011-12 EBITDA, usually lower than broadcast cash flow because corporate overhead has been deducted, comes in at around $92.3 million. At 10x, that translates into more than $920 million. (Editor's note: The preceeding paragraph has been corrected from an earlier version.)

Ten times is on the high side of sellers' trading multiples these days — Nexstar Broadcasting Group CEO Perry Sook told securities analysts yesterday that they now range between 8x and 10x — but Allbritton may be worth it.

Brand Connections

Here's why: The crown jewel in Allbritton's portfolio is WJLA Washington (DMA 8). That alone makes the Allbritton sale particularly noteworthy and could confer benchmark status on it.

WJLA is the first top-10 Big Four affiliate to go on the block in more than a decade. The last were WMUR in Manchester, N.H., which covers Boston (DMA 7), and WGCL in Atlanta (DMA 9). They changed hands in 2001 and 1999, respectively.

"It's very rare for a top-10 station with a Big Four affiliation to come up for sale," says Larry Patrick of Patrick Communications.

WJLA is a solid No. 2 in news (behind NBC O&O WRC) and comes with NewsChannel 8, a thriving regional cable news channel, and two digital subchannels, Me-TV and Live Well. Together, WJLA and NewsChannel 8 produce 114 hours a week of news, public affairs and other local programming.

Moreover, as many in the financial sector note, Allbritton, like nearly every other station group in the country, is coming off a record political year and WJLA likely was among the biggest beneficiaries of the political spending.

"The thing about Washington was it was unbelievable, maybe the top political market this past season," says one financial analyst.

While there were important Congressional races in surrounding states, issues advertising, including the casinos referendum in Maryland, gave the D.C. DMA a big boost.

"Allbritton benefits strongly from the tremendous growth in political advertising by independent committees, unleashed after Citizens United," says Alcamo.  "Importantly, unlike direct candidate advertising, issue and committee advertising is not required to be billed at the lowest unit rate. "

In Allbritton's 10Q for the first quarter ended Dec. 31, 2012 (Allbritton's fiscal year ends Sept. 30), the company reported revenue of $71 million. That's more than a 35% jump from the comparable quarter in the previous year. Both quarters included political revenues, though fiscal 2013's first quarter clearly was stronger.

Allbritton's margins are worth noting as well: nearly 40% in 2012, 33.1% in 2011, yielding a blended average of 36.1%.

Sinclair has put an 8.5 times buyer multiple on its recently announced acquisition of Fisher Communications. At 8.5 times, Allbritton could bring nearly $785 million. But while the Fisher acquisition marked Sinclair's entry into larger markets, there's a difference between Seattle (DMA 12) and Portland (DMA 22) and Washington, D.C., and that Top-10 ranking likely will produce a premium.

Which brings us to potential buyers.

This is a transaction that could turn ABC, which has shown more inclination to sell stations than buy, into a buyer -- but only for WJLA.  Networks like Top-10 Market O&Os.

"I think ABC will get WJLA," says one source familiar with broadcast M&A.

The source notes that while the network doesn't have a right to the station, it does have some influence over whether a new owner gets to keep the affiliation. Case in point: When Young infamously outbid NBC for KRON in San Francisco, NBC pulled its affiliation.

But in his first-quarter conference call with securities analysts on Tuesday, Bob Iger, CEO of ABC parent Walt Disney Co., did not sound enthusiastic about local TV.

"Station business has been generally soft...," he said. "And even though our stations are performing well in their markets and actually in some markets growing share nicely, the markets themselves are basically compressing or getting smaller."

Sinclair's the next obvious possibility. There are pros and cons here, as well. On the pro side, Sinclair's on a buying streak and CEO David Smith has been frank about his desire to be the biggest of the big. As a top-10 market, Washington might be slightly outside Sinclair's comfort zone, but considering the Fisher deal, not by much.


Comments (5) -

Trip Ericson posted over 3 years ago
Is Hubbard not in the running for some reason? WJLA is very closely partnered with WTOP radio, owned by Hubbard. Hubbard's flagship TV station is an ABC affiliate and they own several other ABC stations.
Harry Jessell posted over 3 years ago
Interesting. They could own news in that city.
SlinginSpots Nickname posted over 3 years ago
Not quite. WRC owns the news in this city. And Bob Ryan, the big "steal" by WJLA a few years ago, is retiring after May.
AndyO Nickname posted over 3 years ago
BTW, Hubbard's boss was in the station the day before the sale was announced.
James Cieloha Nickname posted over 3 years ago
WRC, WTTG, WJLA, WUSA, WDCA, WDCW and educational WETA in Washington and WMAR, WBAL, WJZ, WUTB, WBFF, WNUV, and Maryland Public Broadcasting stations WMPB in Baltimore and WMPT in Annapolis predicted over the air signals overlap in each other TV DMA's. Walt Disney/ABC buying WJLA would be terrific since ABC already operates a news bureau in Washington, DC and for competitive reasons for both the Washington, DC and Baltimore, Maryland TV DMA. No to Scripps due to owning ABC station WMAR, no to Hearst due to owning NBC station WBAL, and a big no no for Sinclair (Sincrap) due to owning FOX station WBFF, and controlling and managing CW station WNUV under Cunningham, and NYNET station WUTB under Deerfield and all of them with CBS O&O WJZ can be reachable over the air in Washington, DC at times. I would consider WBFF moving to channel 13 as it's virtual and RF channel with WJZ moving to channel 45 as it's virtual channel and channel 46 as it's RF channel. I would be okay with Hearst getting KATV, KTUL, WSET, and WCIV, with Nexstar getting WHTM and Sinclair transferring the license of WLYH to Cunningham and continue to fully owned WHP, and with Sinclair getting the combined WBMA LD/WJSU/WCFT with the intent of using the the combined WBMA LD/WJSU/WCFT to program FOX on it's DT1 channel and MYNET on it's DT2 channel while WABM continues to program MYNET on it's DT1 channel and add FOX on it's DT2 channel. Sinclair keeps the CW affiliation on WTTO and WDBB. Sinclair could transfer the license of WTTO and WDBB to Cunningham and WABM to Deerfield while Sinclair fully owns the combined WBMA LD/WJSU/WCFT combo or Raycom could buy the combined WBMA LD/WJSU/WCFT combo and place it under the control of American Spirit Media with the intent to move the FOX affiliation there on it's DT1 channel with WBRC rejoining the ABC Network on it's DT1 channel. The combined WBMA LD/WJSU/WCFT combo would air WBRC with ABC on it's DT2 channel while WBRC would air the WBMA LD/WJSU/WCFT combo with FOX on it's DT2 channel.
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Overnights, adults 18-49 for September 26, 2016
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