ABC, Capital Cities to Sell 2 TV Stations to Scripps

As part of the pending merger of American Broadcasting Cos. and Capital Cities Communications, the two companies said Friday that they have agreed to sell the ABC-TV affiliate in Detroit and a Capital Cities independent station in Tampa, Fla., to Scripps-Howard Broadcasting for $247 million.

The sale, which must be approved by the Federal Communications Commission, would become effective once the Capital Cities-ABC merger is completed.

The sale of WXYZ-TV in Detroit and WFTS-TV in Tampa are required by FCC regulations stipulating that television stations owned by a single company may reach no more than 25% of American homes with television.

May Get FCC Waiver

In addition to these two stations, ABC and Capital Cities intend to sell ABC affiliate WTNH-TV in the Hartford-New Haven, Conn., area and WKBW-TV in Buffalo.

The sale of the Detroit station raised speculation among Wall Street analysts that ABC and Capital Cities may believe that the FCC will grant them a waiver to keep the ABC affiliate in Philadelphia.

By strict interpretation of FCC regulations, a company could not acquire stations in both New York and Philadelphia because signals from TV stations in those two markets overlap slightly.

ABC and Capital Cities earlier had indicated that they would keep the ABC-owned station in Detroit if the Philadelphia waiver were rejected.

It also is possible that the sale of the Detroit station is contingent on ABC and Capital Cities winning the Philadelphia waiver.

Price ‘In Line’

“Although the question is legitimate, we do not care to comment on it at this time,” Capital Cities said. Cincinnati-based Scripps-Howard also declined comment.

Wall Street analysts Friday described the Scripps-Howard sale as one that could benefit both parties.

“There were a lot of guesses on the street about what Detroit would go for, and this is in line,” said Susan Watson, an analyst with the New York brokerage firm of Morgan Stanley. “The price is in line with the recent prices for television stations.”

Estimating that the Detroit station alone sold for about $200 million, ABC would be getting about 13.3 times the station’s 1984 cash flow of $15 million, analysts said.

Detroit station WXYZ-TV is the No. 2-rated station in Detroit as of May, according to figures from Arbitron Ratings, although the spread between Nos. 1 and 3 is narrow.

The operating profit margin at WXYZ-TV is “well below the industry average,” said Peter Appert, an analyst with the New York brokerage firm of C. J. Lawrence.

“There is potential to improve the profitability of the station,” Appert said, which is one reason that Scripps-Howard presumably was prepared to pay a relatively high price for a station in Detroit.

Not Turning a Profit

Capital Cities bought the Tampa station for $30 million in August, 1984. The station is not turning a profit but “could earn a good return on investment over time,” Watson said.

Scripps-Howard Broadcasting is 80% owned by E. W. Scripps Co., a Cincinnati media company that owns such newspapers as Denver’s Rocky Mountain News and the Pittsburgh Press.

The broadcasting company currently owns seven television stations, seven radio stations and several cable franchises. Scripps-Howard Broadcasting had net income in 1984 of $18.2 million on revenue of $118 million.