Broadcasting segment contributed most of the profits
Tribune Company (OTCMKTS:TRBAA) operates in two main business segments: publishing and broadcasting. The publishing business consists of eight major-market daily newspapers including the Los Angeles Times, the Chicago Tribune Company (OTCMKTS:TRBAA), The Baltimore Sun and The Morning Call while the company’s broadcasting segment includes The CW Network LLC, FOX Broadcasting Company and Antenna TV. Most of its revenue, $2 billion, or 63.6% of the total revenue, was generated from the Publishing segment, whereas the Broadcasting segment contributed $1.14 billion in 2012 revenue. (2012 was its last year in bankruptcy).
Tribune derived the majority of its Publishing revenue from advertising, which accounted for 58.2% of the total Publishing revenue. Even with the much lower percentage share of revenue, the Broadcasting segment was the larger profit contributor, with $366.5 million, or more than 80% of the total operating profit.
After the bankruptcy reorganization, Tribune had a much stronger balance sheet position. It has significantly reduced its debt load, from $12.48 billion in December to only $1 billion in March. The equity emerged from the negative $8.9 billion to nearly $4.6 billion during the same period, its cash position stayed at $554.4 million as of March.
The right strategic move
Tribune seems to have made the right move by acquiring Local TV Holdings for around $2.73 billion in cash to own 19 TV stations in 16 key markets. Interestingly, as the new TV stations ranked either #1 or #2 in their markets, the acquisition will benefit Tribune a great deal. Tribune will become the country’s biggest commercial TV station owner, with around 42 total stations across the country. This will bring Tribune a lot of free cash flow and be accretive to Tribune’s earnings right away.
Including the estimated run-rate synergies, the price multiple came in at around 7 times its average earnings before interest, taxes, depreciation and amortization, or EBITDA. Tribune expected to have $3.5 billion in consolidated pro-forma revenue and $1.1 billion in EBITDA. At $61.70 per share, Tribune is worth $5.36 billion on the market. Including $4.1 billion recent financing, Tribune’s enterprise value might reach $9.9 billion. Consequently, the EBITDA multiple could reach 9.