Sinclair Broadcast Group Acquires 21 Regional Sports Networks From The Walt Disney Company
On Friday May 3rd the Sinclair Broadcast Group, Inc. and The Walt Disney Company made the announcement that they have entered into a definitive agreement. This agreement states that Sinclair will acquire the equity interests in 21 Regional Sports Networks and Fox College Sports. Disney acquired both of these entities previously in its acquisition of Twenty-First Century Fox, Inc..
Both parties agreed to a total enterprise value of 21 Regional Sports Networks (the “RSNs”) equal to $10.6 billion. After adjusting for minority equity interests the purchase price came to $9.6 billion. Completion of the transaction is subject to customary closing conditions, including the approval of the U.S. Department of Justice.
The RSN portfolio, which excludes the YES Network, is the largest collection of RSNs in the marketplace today. It has an extensive footprint that includes exclusive local rights to 42 professional teams. The portfolio consists of 14 Major League Baseball (MLB) teams. It also includes 16 National Basketball Association (NBA) teams and 12 National Hockey League (NHL) teams. In calendar year 2018, the RSN portfolio delivered a combined $3.8 billion in revenue across 74 million subscribers.
Sinclair Broadcast Group, Inc.
Diamond Sports Group LLC (“Diamond”), a newly formed indirect wholly-owned subsidiary of Sinclair, will acquire the RSNs. 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 (“RSN Holding Company”). Furthermore, 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).
Chris Ripley, President and CEO of Sinclair
“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.”
Mr. 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.”
“We are pleased to have reached this agreement with Sinclair for the sale of these 21 RSNs, subject to the conditions of the consent decree with the U.S. Department of Justice,” said Christine McCarthy, Senior Executive Vice President and Chief Financial Officer, The Walt Disney Company.
Disney and 21st Century Fox
Last year, Disney and 21st Century Fox entered into a consent decree with the U.S. Department of Justice. It that allowed Disney’s acquisition of 21st Century Fox to proceed while requiring the subsequent sale of the RSNs. Sinclair’s purchase does not include 21st Century Fox’s equity interest in the YES Network. The consent decree also requires the disposition of the YES Network. Furthermore, Disney completed its $71 billion acquisition of 21st Century Fox in March.
21 Regional Sports Networks
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. Also included in the acquisition is Fox College Sports.
Sinclair expects to capitalize Diamond with $1.4 billion in cash equity. Approximately $0.7 billion of cash on hand makes up some of its equity. It also includes a contribution of $0.7 billion. New fully committed debt at Sinclair Television Group, Inc makes up this portion of the money. $1.0 billion of fully committed privately-placed preferred equity will additionally fund the purchase price. A newly-formed indirect wholly-owned subsidiary of Sinclair and direct parent of RSN Holding Company makes up this equity. Also, $8.2 billion of fully committed secured and unsecured debt incurred by Diamond funds the remainder of the purchase price. Furthermore, the transaction will be treated as an asset sale for tax purposes, with Sinclair receiving a full step-up in basis.
The Board of Directors of both Sinclair and Disney have unanimously approved the transaction.
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