Tribune Co. to Buy Renaissance for $1.13 Billion

Continuing the consolidation of the television business, Tribune Co. said Monday that it will buy Renaissance Communications Corp. for $1.13 billion in cash, adding six TV stations to its group of 10 and making Tribune the nation’s leading owner of TV stations.

The acquisition by Tribune, which owns Los Angeles station KTLA-TV in addition to the Chicago Tribune newspaper and the Chicago Cubs baseball team, further reduces Tribune’s reliance on its core newspaper business.

The purchase would give Tribune eight stations in the top 11 markets, with new outlets in such cities as Sacramento, Indianapolis, Dallas and Miami. If the deal is approved by shareholders and regulators, the company will own 16 stations reaching 33.4% of the nation’s television households--slightly surpassing the 32% reach of Westinghouse Electric Corp.’s 14 stations.

“This will give us greater access to programming and make us more competitive with cable for programs,” said Dennis FitzSimons, executive vice president of Tribune Broadcasting Co., which already owns stations in the major markets of Los Angeles, New York and Chicago.

Changes in federal rules are fast altering the economics of television ownership, giving large station groups enormous clout in launching shows they develop and in negotiating with program syndicators.

With the passage of telecommunications reforms in February, a single broadcaster can now own stations that reach up to 35% of the nation’s television households, up from 25%, and a nearly unlimited number of radio stations. The reforms have spurred a frenzy of transactions, with the $3.9-billion purchase of Infinity Broadcasting by Westinghouse last month among the largest.

Because most of Tribune’s stations are independent and unaffiliated with the major networks, the additional outlets from the Renaissance purchase strengthen its buying clout.

“They are already the dominant factor in syndication because they have the largest independents in the top three markets,” said James Greenfield, a managing director of Veronis, Suhler & Associates in New York.

“This makes them an even bigger powerhouse. It’s a brilliant strategic move.”

Indeed, on Wall Street, Tribune shares rose $1.375, to $74 a share, while Renaissance shares rose $1.62 to $33.875. The purchase price is valued at $36 a share, with Tribune paying a multiple of about 12 times the projected 1996 cash flow of $85 million, according to analysts.

Of the six Renaissance stations, four are Fox affiliates and two are affiliated with WB, the fledgling network owned by Warner Bros. in partnership with Tribune, which has an option to increase its 12.5% stake to 22.5%. Some analysts speculated that Tribune might shore up the weak distribution of WB by shifting at least three of the Fox stations to WB.

But FitzSimons said Tribune was eager to diversify its station portfolio, which includes one CBS and one ABC affiliate, by signing long-term agreements with Fox. One investor said Tribune would be foolish to trade in the stronger cash flows of the Fox stations.

Although analysts viewed the purchase price as fully valued, they said the expected change in the duopoly rules, allowing a broadcaster to own two stations in a single market, would make the economics more attractive.

And Tribune has plenty of room to add second stations in its markets. While it is bumping up against the 35% limit in terms of household reach, the predominance of weaker UHF stations in its portfolio gives it a discount under federal rules. The Federal Communications Commission counts UHF stations as half credits, reducing Tribune’s expanded reach with the Renaissance purchase to a 25% reach.