Sinclair Broadcasting appears to have emerged as the leading candidate to win the auction of the 21st Century Fox’s Regional Sports Networks, having placed what people close to the deal call the top bid to acquire the properties, FOX Business has learned.
|SBGI||SINCLAIR BROADCAST GROUP||17.25||+0.75||+4.55%|
|DIS||THE WALT DISNEY CO.||93.38||+0.83||+0.90%|
The auction, which began in November, came to an end earlier in the week, when bankers at Allen & Co., accepted final bids from several companies including: Liberty Media, the BIG3 basketball league led by hip-hop impresario Ice Cube, and Sinclair, according to people with direct knowledge of the matter.
Major League Baseball had been a solo bidder on the networks, known as RSNs, but recently pulled out and joined cable honcho John Malone’s Liberty Media in the bidding war, these people say.
Sinclair is said to have bid around $10 billion for the RSNs, which must be sold as part of Disney’s $71 billion purchase of Fox’s entertainment assets to meet federal regulatory requirements since Disney already owns the cable sports network giant, ESPN. The RSNs are a group of cable networks that provide a variety of sports broadcasting throughout the country.
Bankers are said to have determined late Friday that Sinclair had the leading bid at least for the moment, though it’s unclear if they will be declared the official winner of the six-month bidding process. Sources add that bankers are continuing to work the deal heading into the Easter and Passover holiday weekend, looking for a better offer from other bidders, so it’s possible another player could step up with a higher price.
People close to the deal say the winner is likely to be announced in the coming days.
From the beginning of the process, bankers had hoped that online retailer Amazon would place a bid for all of the RSNs, but at least so far the world’s largest e-commerce company is interested in just one of the properties: The Yankees Entertainment and Sports Network, also known as YES.
Spokesmen for Sinclair, Disney and Major League Baseball didn’t return calls for comment. Steve Greenberg, the lead banker for Allen & Co., on the auction didn’t return calls or emails for comment.
Initially bankers had told people they had as many as six interested parties for all the networks—and Disney initially sought as much as $20 billion for the entire package of RSNs, which included YES. The RSNs were valued at $20 billion based on what Disney paid for the Fox assets, which includes all of 21st Century Fox, excluding Fox’s owned and operated affiliates, Fox Sports, Fox News and FOX Business. These properties are now part of the new Fox, parent of FOX Business, which was formed after the Disney deal closed on March 20. Bankers had 90 days from that time to sell off the RSNs.
But people with direct knowledge of the auction say most of the interest came from parties looking to snap up the RSNs at a low-ball price. Industry trends show declining cable profitability due to cord cutting and sports leagues maintaining ownership (rather than the networks), of the all-important digital rights for games to be viewed on wireless devices, all of which has driven the initial bids for all the networks to fall short of $20 billion.
In early March, the Yankees reached an agreement with Sinclair and Amazon to purchase YES from Disney at a price of $3.4 billion, which means the combined packaged could net Disney just under $14 billion, these people add. The Yankees had sold a majority stake of the network, which airs baseball and the games of the Brooklyn Nets, to Fox is recent years.
If the Baltimore-based Sinclair does indeed win the bidding contest, it would help reverse the staggering loss to its growth plans that occurred this summer when the Federal Communications Commission (FCC) shocked the media industry by blocking its bid to purchase 42 local stations from Tribune Media.
Before the failed Tribune deal, Sinclair controlled more than 200 stations in over 100 local markets. The local media empire was built on snapping up these stations around the country and adding an extra element of right-wing commentary to its programming. One major issue for Sinclair is how sports will fit into its business model of local news and conservative commentary since the RSNs are cable properties, Sinclair doesn’t need FCC approval but it does need approval of the Justice Department’s anti-trust division.