Sinclair Broadcast to acquire 21 Regional Sports Networks from Disney at valuation of $10.6B
Sinclair Broadcast (SBGI) and The Walt Disney Company (DIS) announced that they have entered into a definitive agreement under which Sinclair will acquire the equity interests in 21 Regional Sports Networks and Fox College Sports, which were acquired by Disney in its acquisition of Twenty-First Century Fox.
The transaction ascribes a total enterprise value to the RSNs equal to $10.6B, reflecting a purchase price of $9.6B, after adjusting for minority equity interests.
That’s far cheaper than the $15 billion to $25 billion range most analysts had predicted Disney could get.
Completion of the transaction is subject to customary closing conditions, including the approval of the U.S. Department of Justice.
The RSN portfolio, which excludes the YES Network, is the largest collection of RSNs in the marketplace today, with an extensive footprint that includes exclusive local rights to 42 professional teams consisting of 14 Major League Baseball teams, 16 National Basketball Association teams, and 12 National Hockey League teams.
In calendar year 2018, the RSN portfolio delivered a combined $3.8B in revenue across 74M subscribers.
The RSNs will be acquired via a newly formed indirect wholly-owned subsidiary of Sinclair, Diamond Sports Group.
Byron Allen has agreed to become an equity and content partner in a newly formed indirect wholly-owned subsidiary of Sinclair and an indirect parent of Diamond.
Allen, who bought The Weather Channel in 2018, is the Founder, Chairman, and CEO of Entertainment Studios, a global media, content and technology company.
Sinclair expects to capitalize Diamond with $1.4B in cash equity, comprised of a combination of approximately $0.7B of cash on hand and a contribution of $0.7B in the form of new fully committed debt at Sinclair Television Group.
In addition, the purchase price will be funded with $1B of fully committed privately-placed preferred equity of a newly-formed indirect wholly-owned subsidiary of Sinclair and direct parent of RSN Holding Company.
The remainder of the purchase price is being funded by $8.2B of fully committed secured and unsecured debt incurred by Diamond.
The transaction will be treated as an asset sale for tax purposes, with Sinclair receiving a full step-up in basis.
The transaction has been unanimously approved by the Board of Directors of both Sinclair and Disney.
In March, Sinclair, Blackstone and Amazon backed the New York Yankees’ $3 billion re-purchase of the 80% of YES Network the team had sold to Fox in 2014. YES Network was the 22nd channel in the former Fox portfolio, and was seen as the crown jewel.
And back in February, Sinclair partnered with the Chicago Cubs to create a new RSN in Chicago, to be called Marquee Sports Network, that will air all local Cubs games beginning in 2020.
Sinclair is the largest owner of local television stations (it owns 200) in the country. SBG also owns the Tennis Channel. (It is also a partner in the joint venture sports streaming platform Stadium.) By 2020, it will operate 22 regional sports networks, plus a minority ownership stake in YES.
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