When Vincent Sadusky, LIN Media president and CEO, set out on his annual stations visit to his deputies this fall, he had a much more challenging route to follow than in years’ past. Not only was there Hurricane Sandy’s fury to contend with, but he also had several new stations to check out, thanks to LIN’s recently closed acquisition of 13 New Vision stations.
The deal will likely dominate the investor Q&A when LIN presents third-quarter earnings Nov. 8. While every broadcast CEO is in search of the almighty duopoly to improve ef ciencies, that was not a key driver in LIN’s grab. Sadusky said the attraction to New Vision was threefold: It gives LIN a larger group upon which to apply company best practices for news and sales, it provides LIN with more clout in extracting retrans payments from MVPDs and it presents digital revenue opportunities for the Web-savvy group. (LIN’s digital sales out t, RMM, recently opened an operation in Los Angeles.)
“That was a nice opportunity for us,” says Sadusky.
At the time of the acquisition, Sadusky cited the geographical diversity, particularly in the south and west, the New Vision deal provided. The stations include KOIN Portland, WIAT Birmingham and KHON Honolulu. The group’s pro le of competitive stations in midsize markets made them a good fit for LIN, while Sadusky says he and his executive team have been pleased with the state of the smaller market stations, such as those in Topeka and Mason City, Iowa, as revenue generators. (At least one station dealer nonetheless sees LIN of oading the smaller stations.)
The Hawaii leg of the trip may sound plum, but Sadusky says the junket is way better on paper. “We’ll spend as much time ying as we’ll spend on the island,” he says with a laugh. “One of these days I’ll go for a bit longer.”
While recently sold stations often show the scars of neglect, Sadusky says the New Vision outlets are in good physical shape, and with adequate staff levels. LIN will implement its news research and sales training to convey the company playbook. “We’ll make an investment in the stations so that viewers can tell the difference and advertisers can see the results,” he says.
While LIN seems to have the reach to try out a groupwide program, such as those done within Scripps and Raycom, Sadusky says such a venture won’t likely be happening in the near term. “It’s a real challenge to have a program of very high quality that doesn’t have the localism element,” he says. “Hopefully that changes over time.”
Now operating or servicing 43 stations and seven digital channels in 23 markets, LIN needed more muscle in corporate. Toward that end, Jay Howell, vice president and general manager at WPRI-WNAC Providence, was elevated to a regional role, moving across the Providence River to corporate HQ. “The company had never done an acquisition this large before,” says Sadusky. “It was a nice opportunity for some talented folks to get more involved.”
Several industry watchers on the M&A side felt the New Vision deal was a smart one for LIN, as it picked up some larger markets and added a few existing virtual duopolies. “They paid a fair market price for the group and had dry powder to do the transaction,” says Larry Patrick, managing partner at brokerage Patrick Communications. “I believe that LIN is one of the best-managed companies in our business. They are talented operators who will take these former New Vision stations to stronger performance.”
Sadusky did not sound as though he envisioned more stations joining LIN in the near term. “We’re always looking to be more active on the digital front,” he says. “But we’re not going to get bigger just for the sake of getting bigger.”
Amidst Sadusky’s excitement with the expanded group, one element of the business remains a source of frustration: LIN’s stock price, which hovered around $5.60 at presstime, up from around $3.73 when the New Vision deal was announced, but still undervalued in the eyes of some. “Strangely, investors appear lukewarm about the acquisition,” says Michael Alcamo, president of investment banking firm MC Alcamo.
That may change. “Cash ows from the acquired stations should increase, and its price/earnings multiple should rise to a more normal level,” Alcamo adds. “The dynamics together should give the stock some strong lift.”
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