Arlington Capital Partners’ New Vision Group announced the acquisition of two TV stations at the end of September, representing the inaugural purchases for the newly formed company, which was created by Arlington to hold an ensemble of network-affiliated TV stations. The company acquired NBC affiliate KSBY, which serves the Santa Barbara, Calif. market, for $39.5 million and also agreed to buy Amarillo, Texas-based KVII, an ABC affiliate, for $16.85 million. The KVII acquisition is awaiting FCC approval and is scheduled to close on Oct. 15.
Both deals were financed with roughly the same amount of equity and senior debt, which for both deals was supplied by MCG Capital. Perry Steiner, a principal at Arlington Capital, said the firm was as aggressive as possible in financing the deals.
Upon the formation of New Vision Group, Arlington Capital appointed Jason Elkin as chairman and chief executive of the new company, while John Heinen will serve as president. Elkin has previously served in the same capacity at New Vision Communications and CTN Media Group, and Heinen has also held senior executive positions for a number of television stations and broadcast groups, including Gannett Co. and Ellis Communications. Steiner lauded the management team put together for the new company, noting that their participation in New Vision was one of the driving forces behind Arlington’s investment strategy.
Steiner said New Vision is looking to build a cast of between five and 15 stations, with a blueprint to create a diverse mix in both network affiliations and geographic locations. Arlington is directing its attention on acquiring underperforming, middle-market stations, that possess considerable upside potential. More specifically, Steiner details, Arlington is looking for stations that have a profit margin that is below 35% to 40%, a range that the firm feels should be attainable for middle-market stations. Additionally, Arlington is attracted to network affiliates with an accomplished local news program, as that is what typically drives the success of a station.
Steiner added a number of regulatory hurdles are currently under review by the Federal Communications Commission, which, if overturned, could further help New Vision going forward. He lists ownership caps, duopoly regulation and cross ownership of media among the more pertinent issues currently being reconsidered by the commission. The firm is particularly interested in the duopoly regulation, as Steiner points out that the synergies between two stations in any given market would be especially attractive to New Vision in its accrual of network affiliates.
Additionally, Steiner feels that advertising is either near or at the bottom of the current cycle, and network TV is well positioned versus radio, cable and other mediums to take advantage of any uptick. However, Steiner stresses that New Vision’s success is not dependent on a rebound in advertising or the regulatory issues.
Washington, D.C.-based Arlington Capital used Arlington Capital Partners Fund I, its inaugural and sole fund, for the investments. The fund started with $452 million of capital under management and has so far invested roughly $100 million. The fund focuses on companies in the business services, media, communication, IT and other related fields.