This summer, SunTx, a Texas-based private equity company, sold down its interest in London Broadcasting Company (LBC), a media group it had set up LBC in 2007 with former Gaylord Entertainment CEO Terry London.
LBC went on to accumulate 28 channels in 7 markets, serving about 40 percent of the households in Texas. Mainly based in the larger Texas cities like Waco, these channels essentially account for the local media market outside major hubs like Dallas and Houston. Now, SunTx has offloaded six of the biggest to US-based media conglomerate Gannett, in a $215 million all-cash deal.
LBC was created out of SunTx’s $230 million debut middle market fund, which closed in 2004, and its $256 million Fund II, which closed in 2010. Following this transaction – which saw the firm realise 17x cashflow, according to sources familiar with the deal – SunTx will retain a minority stake in what’s left of LBC, and is looking for opportunistic deals for its remaining stations.
The deal was also notable in that it received Federal Communications Commission approval in just 40 days – a lightning-fast result given that some deals have been sitting on the FCC’s desk for more than six months; and particularly since this is the Texas media market, which has seen significant consolidation (attracting FCC attention) lately.
On the surface, the deal looks a fairly straightforward partial exit. But what happened next will have piqued the interest of TMT players: in August, Gannett announced plans to split its media platform in two.
Earlier this year, Gannett had completed the $1.8 billion acquisition of Cars.com, a car comparison site (it had previously been a minority owner of the business alongside Tribune Media, The McClatchy Company, A.H. Belo and Graham Holdings, holding a 27 percent stake).
It had also acquired Dallas-based Belo Corporation’s TV stations – a deal that nearly doubled Gannett’s broadcast portfolio and created the largest independent station group of major network affiliates in the top 25 markets. Gannett now reaches approximately one-third of all television households in America; it ranks as the #1 CBS affiliate group, the #4 ABC affiliate group, and has strengthened its position as the #1 NBC affiliate group.
Now, Gannett intends to take all of its digital, radio, and television properties, including the stations it bought from Belo and LBC, plus Cars.com, and spin them out to create a new (as yet unnamed) entity. Gannett will continue to exist, but only as a print publishing business, which is best known for national newspaper USA TODAY. Both companies will remain headquartered in Mclean, Virginia.
“These acquisitions, combined with our successful initiatives over the past 2.5 years to strengthen our publishing business, make this the right time for a separation into two market-leading companies,” said Gracia Martore, president and chief executive officer at Gannett.
The split brings Gannett into line with other players in the space. The Tribune Company recently spun off its print business, forming Tribune Publishing Corporation. And both News Corporation and Time Warner are currently embroiled in similar consolidation talks; indeed, the latter’s proposed tie-up with Comcast has sparked national outrage in the US over the rapid consolidation of US media.
The question is: as these companies reconfigure to become even larger and more targeted entities, will the opportunity set for specialist TMT players like SunTx start to diminish? Or will it just provide a nigh-on guaranteed exit route?
For now, though, the firm still has the remaining LBC stations to think about. It has been non-committal about its intentions – but given its size, the Texas market could serve as a bellwether for other big regional markets in the US.