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Telecommunications industry

Lin Broadcasting Corporation Plans to Spin Off TV Stations Amid Regulatory Worries

Strategic Insights

— 2 min read

The Lin Broadcasting Corporation, a telecommunications company that operates cellular phone systems in five of the nation's top markets, plans to buy an ABC television affiliate and then spin off seven TV stations to shareholders. This move makes Lin essentially a cellular company, positioning it for a potential acquisition by its majority owner, McCaw Cellular Communications Inc., which is itself being purchased by AT&T Corporation. Analysts believe that ownership of television stations may pose regulatory problems for the phone company.

Key Takeaways:

  • Lin Broadcasting Corporation plans to buy WTNH-TV, an ABC affiliate in New Haven, and then spin off seven TV stations to shareholders, making it essentially a cellular company.
  • The move positions Lin for a potential acquisition by its majority owner, McCaw Cellular Communications Inc., which is being purchased by AT&T Corporation.
  • McCaw has an agreement to either purchase all the remaining shares of Lin in 1995 or sell the shares it currently owns.
  • The spinoff will create a new publicly traded entity called the Lin Television Corporation, which will operate seven network-affiliated stations.
  • Lin Television will be 42% publicly held and 46% owned by McCaw, with the option to buy an eighth station eventually.
  • Last year, television stations generated 20% of Lin's $689 million in revenue and cash flow of $80 million.
  • McCaw is under agreement to be purchased by AT&T Corporation in a $12.6 billion deal, which was temporarily blocked by a Federal judge due to possible antitrust violations.
  • George V. Robertson, analyst for Alex. Brown & Sons, said that government rules prohibiting cross-ownership of broadcast properties in a single market would inhibit the potential of the AT&T-McCaw combination.
  • Jeffrey Logsdon, an entertainment analyst with the Seidler Companies, believes that spinning off TV stations would free Major players from acquisition complications.

Statistics:

  • Lin Broadcasting Corporation is buying WTNH-TV, an ABC affiliate in New Haven, for $120 million and 11.5% of the stock in Lin Television.
  • The spinoff will create a new publicly traded entity called the Lin Television Corporation, which will generate 20% of Lin's $689 million in revenue.
  • Last year, television stations generated $138.8 million in revenue for Lin, 20% of the company's total revenue of $689 million.
  • McCaw agreed to either acquire all the outstanding shares of Lin Television or put the whole company up for sale by 1998.
  • McCaw is being purchased by AT&T in a $12.6 billion deal, and the acquisition was temporarily blocked by a Federal judge due to possible antitrust violations.
  • Lin will continue to own an eighth station, WOOD, an ABC affiliate in Grand Rapids, Mich., "due to prior financing arrangements."

Sources:

  • "Lin Broadcasting Said to Plan Buy of TV Affiliate and Then Spin Off Stations" by an unknown author (no date mentioned in the article)
  • Paine Webber Inc.
  • Alex. Brown & Sons
  • Seidler Companies
  • The Seidler Companies' statement to the press

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