Sinclair looking to get stronger

It hires Bear Stearns to help it benefit from ownership rules changes

October 20, 2001|By William Patalon III | William Patalon III,SUN STAFF

Sinclair Broadcasting Group Inc. has hired investment banker Bear Stearns to look for ways to benefit from expected changes in television-station ownership rules, the Baltimore-based Sinclair said yesterday.

"Our overall objective is to end up a stronger company at the end of the day," said David B. Amy, Sinclair's chief financial officer.

According to Amy, three major television-ownership rules are expected to change, or to at least become less stringent. And those changes are projected to touch off a flurry of deals for TV stations. Sinclair could do some buying and selling, the company said.

The first rule at issue deals with cross-ownership: Companies currently can't own a TV station and a newspaper - or a TV station and a cable TV property - in the same market, Amy said. Second is the so-called "ownership cap" rule. According to Amy, a company cannot own TV properties whose coverage of the overall U.S. market exceeds 35 percent. Sinclair is safe there, since its string of 62 television stations in 40 markets covers a quarter of U.S. households. But there are companies violating this rule, he said.

Third is the "duopoly" rule, which prohibits a company from owning more than one TV station in the same market. The only exception - known as the "eight voices test" - is when there are at least eight individual owners in that market, Amy said. There is widespread industry expectation that these rules would be relaxed: The cross-ownership and ownership-cap rules are supposed to be reviewed this fall, Sinclair said.

If, or when, these rules do change, the broadcasting industry could well turn into a high-finance version of "Let's Make a Deal." Companies may want to bolster their presence in some markets, using the proceeds reaped from selling out in other markets to do so.

Without being specific, Amy said Sinclair is looking for ways to be a player in that game. Deregulation could make some of Sinclair's TV stations more valuable because other companies need them to fulfill their own new strategies.

As an investment banker, Bear Stearns will help Sinclair devise its plans: deciding where to become stronger and which markets to leave. Bear Stearns will likely run the auction for the TV stations put on the block, making sure Sinclair gets the highest price possible.

"Our overall objective is to unlock shareholder value and strengthen our balance sheet by building our local franchises in each of our remaining markets," said David Smith, president and chief executive of Sinclair.

"The television broadcast landscape is expected to change dramatically over the next year as a result of the much anticipated deregulation of the television ownership rules," Smith said.

Sinclair's shares jumped 81 cents to $8.09 yesterday.

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