Scripps Howard Broadcasting Co. says it will purchase WMAR-TV for $125 million, about $30 million less than the selling price agreed on seven months ago.
But the sale price is not a bargain, according to Susan Putnam, a media analyst for Moran & Associates Inc. in Greenwich, Conn.
"I wouldn't consider it a steal. Scripps is paying a fair price," Putnam said.
Although Gillett Broadcasting of Maryland Inc. purchased WMAR-TV and a UHF station in Richmond, Va., for $209 million in July 1986, the growth of cable and the recession have depressed prices of television stations nationwide.
At one time, such stations commanded prices of about 12 times cash flow, but that has dropped to about eight times cash flow, Putnam said. A percentage of cash flow is a common way to determine the selling price of such businesses, she said.
Putnam said that in the mid- and late 1980s, television stations, newspapers and other media operations were overpriced in an "overheated" market. "Prices just got too high," she said.
But the recession, which caused capital to dry up, has brought prices down. She said Scripps got a good deal because it had money.
As part of the sale agreement announced yesterday, Gillett Broadcasting of Maryland Inc. is to drop its breach-of-contract lawsuit against Scripps Howard.
In February, Gillett filed suit against Scripps Howard in U.S. District Court in Chicago for backing out of the original deal, announced last August. Scripps Howard contended that unspecified closing terms had not been met.
The latest agreement is still contingent on certain closing conditions. These involve bankruptcy proceedings, unrelated to WMAR-TV, that were filed in February in Colorado by holders of subordinated debentures of Gillett Holdings Inc., the parent company of Gillett Broadcasting.
The sale would end Gillett's two-year effort to sell Channel 2. Gillett bought WMAR-TV and the Richmond station in July 1986 from the Times Mirror Co., which also owns The Evening Sun and The Sun.
The deal is also seen as a way for owner George Gillett to resolve some of his financial problems. He has been in default on more than $250 million worth of bonds since August and reportedly has $983 million in outstanding debt.
Three bondholders filed a petition in U.S. Bankruptcy Court trying to force Gillett -- who also owns ski resorts in Colorado -- into Chapter 11 reorganization. Creditors have listed claims of $21 million. Gillett Holdings' affiliates -- which include Gillett Broadcasting -- are not part of the Chapter 11 petition.
The $125 million price tag for WMAR-TV is substantially less than the $154.7 million the two parties had agreed on last summer.
Arnie Kleiner, president and general manager of WMAR-TV, said he does not anticipate any "material" changes at the station.
The Cincinnati-based Scripps Howard, an 80 percent-owned subsidiary of the E.W. Scripps Co., owns nine television stations, five radio stations and cable television systems.