Sinclair Broadcast Group Inc., the Hunt Valley-based broadcast company, is selling one of its top-performing television stations, in Sacramento, Calif., to Viacom Inc. for $285 million as part of a plan to leave markets where it can't own two stations.
The company said yesterday that it will sell its CBS affiliate KOVR-TV, Channel 13. Sinclair added the station, in the country's 19th-largest television market, to its portfolio when it merged with River City Broadcasting in 1996.
Since 2001, Sinclair has sold $443.5 million in television stations that it assessed were at a competitive disadvantage or were in cities where it couldn't build a duopoly - owning two stations in a market. Last month, Sinclair said it would sell KSMO-TV, a WB station that runs on Channel 62 in Kansas City, Kan., to Meredith Corp. of Iowa for $33.5 million.
"I think this is a strategic move for Sinclair," said Paul T. Sweeney, an analyst with Credit Suisse First Boston. "If they can't buy a second station in a particular market then they look to sell that station to use the proceeds to create duopolies in other markets."
Sinclair has been at the forefront of continuing controversy over relaxation of federal rules that limit the number of media outlets one company can own in a single market. The company raised ire in October when it instructed its stations to air a documentary critical of Sen. John Kerry's Vietnam War protests just before the election. Sinclair ultimately aired a more balanced program.
Sinclair stock, which fell to a three-year low of $6.26 at the height of the flap in mid-October, rose 14 percent yesterday, or $1.04, to close at $8.41.
Sinclair can use the proceeds to help pay down its $1.7 billion in debt, an amount that some shareholders and analysts think is high.
Viacom's purchase of KOVR-TV, subject to federal approval, would give it two stations in California's state capital. The New York-based media giant, which owns CBS-TV, MTV and Infinity Broadcasting, has eight other TV duopolies.
"It's worth more for Sinclair to sell it than to continue to own it," said Jack Messmer, executive editor of the Radio & Television Business Report, an industry publication. "They couldn't ever envision getting a second station in that market."
Sinclair, one of the nation's largest television companies with 62 stations in 39 markets, didn't return calls yesterday. But David Smith, its president and chief executive officer, in a press release reiterated his view of the importance of duopolies to compete with new media.
He said that "since Viacom also owns the UPN affiliate in Sacramento, it signifies the importance of building a market franchise to effectively compete alongside the cable and satellite giants."
Geography could have played a part in Sinclair's decision, Messmer said. With the sale of the Sacramento station, Sinclair will have only two stations in the West, in Las Vegas.