Tribune Media Co. (NYSE: TRCO), owner of 42 local-TV stations and the WGN America cable network, said it intends to explore “strategic and financial alternatives” to better reflect its value, with its stock down 50 percent in the past year.
Tribune’s board and the company are working with Moelis & Co. and Guggenheim Securities on potential options, which may include selling or separating assets or pursuing new partnerships and programming alliances, according to a statement Monday. The company hasn’t set a deadline for completing a review of alternatives, it said.
“We believe that the value of the portfolio of businesses of Tribune Media is not fully reflected in the stock price and intend to explore ways to unlock value by reviewing strategic alternatives,” Tribune Chairman Bruce Karsh said.
Tribune has pushed to attract viewers to WGN with original programs like “Salem” and “Outsiders” -- and it’s worked, with the network’s revenue from cable providers climbing 58 percent last quarter from a year earlier to $8.3 million. But the strategy has led to higher programming costs that have squeezed Tribune’s profit margin, and cable operators are moving to smaller packages of channels that leave networks like WGN battling for a slot.
Tribune, the largest U.S. operator of broadcast stations by coverage, has also been forced to sit on the sidelines in the latest round of mergers by its competitors. Nexstar Broadcasting Group Inc. agreed last month to acquire Media General Inc. for $4.6 billion, ending a pact in which Media General and Meredith Corp. were to merge. Media General itself acquired Lin Media LLC late in 2014. Tribune can’t get much bigger because Federal Communications Commission rules don’t allow broadcasting companies to exceed coverage of 39 percent of U.S. television households. Tribune covers 44 percent of the population, according to a Bloomberg Intelligence analysis.
Broadcasting companies have been combining to reduce costs and gain negotiating leverage with cable companies, which pay fees to rebroadcast local signals to subscribers, and television networks like CBS Corp., which provide programming and want a portion of that money. Tribune’s stations include affiliates of CBS, 21st Century Fox Inc. Fox, Walt Disney Co.’s ABC and Comcast Corp.’s NBC.
“There is a lot of interest in TV stations. Now may be a good time for Tribune to test the waters,” said Paul Sweeney, an analyst at Bloomberg Intelligence. “The company owns TV stations in some of the largest markets in the country, including New York, Los Angeles and Chicago. Assets like these don’t come on the market everyday.”
If Tribune Media puts itself up for sale, it may struggle to find suitors, however. Sinclair Broadcast Group Inc., Tegna Inc. and Nexstar are all close to station limits.
Tribune’s stock has performed poorly because of higher-than-anticipated programming spending and concerns about the traditional cable-TV ecosystem, Barry Lucas, an analyst at Gabelli & Co., said in a research note in December. The company is investing to make WGN a fully distributed cable network, with a reach of about 80 million households, mixing original programming and reruns from other networks to build audiences. That requires many years to accomplish and is complicated by similar strategies from other cable network owners, according to the note.
The company spun off its newspaper business in 2014, create Tribune Publishing Co., less than two years after emerging from bankruptcy protection. Tribune Media has minority stakes in the Food Network and in website CareerBuilder, and it owns and manages real estate it values at more than $1 billion. The company in 2014 also bought Sony Corp.’s Gracenote audio-recognition software business, which provides movie and music information that can be found on TV sets, smartphones and in cars.
Tribune Media shares have declined 61 percent since the split with the publishing business, compared with a 6.3 percent increase for the Russell 3000 Radio & TV Broadcasters Index.
The broadcaster announced plans late last year to sell Chicago’s Tribune Tower and its Los Angeles Times Square property. The company is also considering sales of other properties, it said Monday.
Tribune Media reported a net loss of $380.9 million, or $4.07 a share, compared with net income of $314.7 million, or $3.14, a year earlier. The loss included an impairment charge of $381 million to write down the intangible value, or goodwill, of its cable unit. Sales slid 1.1 percent to $547.6 million due to lower political advertising.