Radio sell-off to strengthen Sinclair

Analysts say company can pare debt and concentrate on TV


July 28, 1999|By Mark Ribbing | Mark Ribbing,SUN STAFF

Sinclair Broadcast Group Inc.'s decision to sell off the bulk of its radio stations will allow the Baltimore company to whittle down its debt and focus on television, analysts said yesterday.

Radio comprises a relatively small share of Sinclair's bottom line. The company's money derives largely from its role as a major holder of television stations, especially medium-market affiliates of upstart networks Fox, UPN and the WB Network. Locally, Sinclair owns Fox station WBFF-45 and programs the WB Network's WNUV-54.

Sinclair's rise to prominence has come at a steep price. The cost of station acquisitions pushed the company's debt to $2.6 billion, causing Sinclair to launch a $500 million divestiture program this year. Bit by bit, the company has begun selling radio and television stations that it felt did not fit into its strategy. On June 8, Sinclair confirmed the expectations of many analysts by saying it was thinking about getting out of radio altogether, either by selling its stations or setting up a separate radio subsidiary.

Monday night, the company went with the sell-off strategy, announcing that it had signed a letter of intent to sell 43 radio stations in nine markets to Entercom Communications Corp., a Bala Cynwyd, Pa., radio broadcasting company, for $821.5 million in cash.

The sale, which is subject to the approval of the Federal Communications Commission and the Justice Department as well as the boards of the two companies, would leave Sinclair with 10 radio stations in three markets -- St. Louis and Kansas City, Mo., and Greenville, S.C. All of these remaining stations will likely be sold soon, Sinclair said.

"We are leaving radio because we got what we thought was a very attractive price; now we're going to concentrate on television," said Patrick J. Talamantes, Sinclair's treasurer.

"Radio is only about 16 percent of our revenues," Talamantes added. "We felt we could better utilize our proceeds from the sale of the radio group to pay down debt and position us for further television acquisitions and for buying back stock."

Sinclair shares rose 12.5 cents to $17.50 yesterday. Entercom shares gained $2.625 to $39.75.

Analysts said that, while radio stations have emerged as hot properties, Sinclair will likely benefit from getting rid of nontelevision assets.

"It was, in the long run, better to sell the radio stations for the very high price they did get and focus on their core business, which is television," said Paul T. Sweeney, an analyst at Salomon Smith Barney Holdings Inc. in New York.

Victor B. Miller of Bear, Stearns & Co. Inc. in New York said the sale strengthens Sinclair for further deal-making.

"Shareholders wanted them to unlock the radio assets; they've done that," Miller said. "The company would like to engage in some acquisitions going forward, and they now have a little better balance sheet."

For the time being, though, it is a balance sheet still soaked in red. While the Entercom sale would push the size of Sinclair's divestiture program to near the billion-dollar mark, Talamantes said, Sinclair's debt will stand at $1.8 billion even after the close of the deal.

Sinclair said it expects to reach a definitive agreement with Entercom in three weeks, and to close around the end of this year.

The letter of intent calls for Entercom to buy $5 million in advertising time on Sinclair's television stations over five years, and to reimburse Sinclair for up to $2 million in expenses for new radio-station facilities in Buffalo, N.Y.

Pub Date: 7/28/99

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