Sinclair Offloading Grossly Undervalued Assets, Plans to Sell About 30% Broadcasting Stations

By Moon Harper

May 10, 2024 01:16 AM EDT

Broadcasting Station — (Photo : Unsplash/Joshua Hanson )

According to sources familiar with the situation, Sinclair, a major owner of broadcast stations in the U.S., plans to sell over 30% of its stations.

Sinclair Offloading Undervalued Stations

Moelis, hired as Sinclair's investment banker, has identified over 60 stations across the U.S. that it is willing to sell, according to sources who requested anonymity as the talks remain confidential.

Sinclair owns or operates 185 TV stations in 86 markets, covering affiliates from Fox, NBC, ABC, CBS, and the CW, whose revenue for 2023 and 2024 is estimated at $1.56 billion if sold as a package. Sinclair is also open to selling all or some of these stations, which are located in major markets such as Minneapolis, Portland, Oregon, Pittsburgh, Austin, Texas, and Fresno, California, among others.

Sinclair CEO Chris Ripley mentioned during his company's earnings conference call on Wednesday that the company is willing to offload portions of its business and explore asset sales to unlock its undervalued potential and de-lever. While the company officially began shopping at the stations in February, representatives for Sinclair and Moelis declined to provide any comments.

Sinclair is also considering options for its Tennis Channel, a cable TV network featuring tennis and pickleball matches. Over the past five years, the decline in traditional pay TV subscriptions has impacted broadcast TV station groups, which relied on retransmission fees paid on a per-subscriber rate by traditional TV distributors like Comcast, DirecTV, and Charter. Sinclair's market value has decreased by over 70% in the last five years, with a market capitalization of approximately $975 million and an enterprise value of around $4.7 billion.

Sinclair Internal Challenges

Sinclair underwent a rebranding and restructuring last year, dividing the company into two operating units: the Local Media, which concentrates on managing the stations, and Ventures, which oversees the Tennis Channel and serves as a potential investment platform. According to sources, tensions within the Smith family, the shareholders, and the board of directors, who played a crucial role in building Sinclair, are driving the division of the company and the ongoing sale process for certain stations.

The stations are being sold before the 2024 election, a period known for generating substantial political advertising revenue for broadcast TV firms. Sinclair announced during its earnings call on Wednesday that it had pre-booked $77 million in political advertising for the latter half of the year leading up to Election Day, contrasting sharply with the $21 million pre-booked at the same point in 2020, the last presidential election year featuring Donald Trump and Joe Biden.

Sinclair's overall revenue and advertising revenue slightly increased in the first quarter, which was reflected in a 12% rise in the company's stock on Thursday. Despite being known for its conservative editorial stance, Sinclair's broadcast stations stirred controversy in 2018 when they were mandated to air promos denouncing the media for fake stories.

Conflict with Its Subsidiary Diamond

Sinclair's decision to sell some of its stations follows challenges it encountered in the regional sports networks sector when Sinclair acquired the most extensive portfolio from Disney in 2019, amounting to $10.6 billion, with a significant debt load of $8.8 billion. However, cord-cutting and the substantial debt burden led to financial difficulties for Diamond Sports, an independently run subsidiary of Sinclair, who filed for bankruptcy protection last year, prompting legal action against Sinclair, which was later resolved in January, with Sinclair making a $495 million payment.