Sinclair Broadcast Group Inc and The Walt Disney Company entered into a definitive agreement late last week 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 $10.6bn, reflecting a purchase price of $9.6bn, after adjusting for minority equity interests. Completion of the transaction is subject to customary closing conditions, including the approval of the US Department of Justice.
The acquisition places Sinclair in a strong position to take advantage of the growing US sports betting market both in terms of increased fan engagement and an anticipated ad revenue stream potentially worth up to $2bn.
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 (MLB) teams, 16 National Basketball Association (NBA) teams, and 12 National Hockey League (NHL) teams.
In 2018, the RSN portfolio delivered a combined $3.8bn in revenue across 74 million subscribers. The RSNs will be acquired via a newly formed indirect wholly-owned subsidiary of Sinclair, Diamond Sports Group LLC. 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 Chief Executive Officer of Entertainment Studios, a global media, content and technology company. Sinclair’s existing sports business consists of Marquee Sports Network (a recently announced joint venture with the iconic Chicago Cubs), Tennis Channel and Tennis Media Company (dedicated to live tennis events and tennis lifestyle), Stadium (a joint venture focused on college sports and professional highlights), Ring of Honor Wrestling (professional wrestling), and robust high school sports programming (with Friday Night Rivals and Thursday Night Lights).
“This is a very exciting transaction for Sinclair to be able to acquire highly complementary assets,” commented Chris Ripley, President and CEO of Sinclair. “While consumer viewing habits have shifted, the tradition of watching live sports and news remains ingrained in our culture. As one of the largest local news producers in the country and an experienced producer of sports content, we are ideally positioned to transfer our skills to deliver and expand our focus on greater premium sports programming.”
Ripley continued: “The transaction is expected to be highly accretive to free cash flow and brings consolidated net leverage to 4.7x and 5.1x through the preferred financing. This acquisition is an extraordinary opportunity to diversify Sinclair’s content sources and revenue streams with high-quality assets that are driving live viewing. We also see this as an opportunity to realize cross-promotional collaboration, and synergistic benefits related to programming and production.”
The RSNs to be acquired by Sinclair are: Fox Sports Arizona, Fox Sports Detroit, Fox Sports Florida, Fox Sports Sun, Fox Sports North, Fox Sports Wisconsin, Fox Sports Ohio, SportsTime Ohio, Fox Sports South, Fox Sports Carolina, Fox Sports Tennessee, Fox Sports Southeast, Fox Sports Southwest, Fox Sports Oklahoma, Fox Sports New Orleans, Fox Sports Midwest, Fox Sports Kansas City, Fox Sports Indiana, Fox Sports San Diego, Fox Sports West, and Prime Ticket.