LIN TV Tunes In To Public Market –

Back in March 1998, Dallas-based private equity firm Hicks, Muse, Tate, & Furst Inc. bought out formerly public television station operator LIN Television Corp. for $1.9 billion (Buyouts, Nov. 10, 1997, p. 4). On May 3, 2002, LIN TV (as it is now known), floated on the New York Stock Exchange priced at $22 per share. The stock opened on its first day at $23 and closed at $25, up 13.6%, and the general consensus among spectators has been “not bad for an unprofitable company.”

Hicks Muse paid approximately $25 per share with its original investment and under its leadership the company was able to grow to 26 stations in 19 U.S. markets from13 television stations at the time of the acquisition. Seven of those stations were incorporated into LIN from Sunrise Television, an earlier purchase of Hicks Muse. However, LIN TV has reported net losses on revenue since at least 1999. Pro forma 2001, the company reported a net loss of $13.97 million on revenue of $332.4 million. That follows a net loss of $34.2 million on revenue of $295.7 million in 2000, and a $34 million loss on revenue of $224.5 million in 1999.

The company, now trading with the ticker LTV on the NYSE, performed relatively well in its first few days of trading. The offering, whose shares increased to 17 million from 14.6 million just a day prior to the event, generated $374 million. LIN TV plans to use the proceeds to repay substantially all of the outstanding indebtedness of Sunrise and preferred stock of STC Broadcasting [a subsidiary of Sunrise], other than any portion of these obligations that Hicks Muse expects to acquire and exchange for shares of LTV class B common stock in connection with the Sunrise acquisition, according to the S-1 filed with the Securities and Exchange Commission.

With the completion of the offering, LIN TV will terminate its management and oversight agreement with Hicks Muse, and will acquire Sunrise and STC Broadcasting.

Deutsche Bank Securities is the lead manager on the deal, and it is co-managed by Bear Stearns & Co., J.P. Morgan Chase, Credit Suisse First Boston, and Morgan Stanley.

The Viewing Public

In addition to the 26 television stations operated by LIN TV, the company provides management or sales services to another four stations. Its stations, which broadcast in 21 markets, cover approximately 6.8% of U.S. television households and all of the 1.2 million television households in Puerto Rico, according to its filing. The company has ambitious goals to expand into 60 markets with 125 stations in the next three to five years.

While the numbers in the television broadcasting industry look good for 2002 compared with 2001 (with a boost in revenue from the Olympics and a recovery from the ad sales hiatus incurred after 9/11), growth may not be quite the walk in the park LIN TV’s goals suggest. “My concern [regarding the TV broadcasting industry] is on the hype around consolidation in the space,” said Jonathan Jacoby, an analyst in the radio and television broadcast group at SunTrust Robinson Humphrey. “I don’t think consolidation will be as rapid as a lot of people think. I expect more one-off deals or asset swaps.”

Jacoby adds that if a company is patient, there are good properties available if they’ll pay the price. However, valuations are up and there are many TV properties out there, but only if a company can justify paying 14 to 15 times multiples, he said.

The last television operator to go public before LIN TV was Entravision Communications Corp., a media company that targets Hispanic customers with TV, radio, outdoor and publishing operations. The company priced at $16.50, and began trading on the Nasdaq SmallCap in August 2000.

In the second half of 1999, two television operators began trading on the Nasdaq. Acme Communications Inc. (ACME), a WB Network affiliated station group, priced above its $19 to $21 range at $23, and began trading in September. Charter Communications Inc. (CHTR), a cable television operator, began trading in November 1999, priced at $16.50.

All three of those companies are currently trading below their original offering price.

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