Young Broadcasting Shares Fall 25% on Canceled Offer

Young Broadcasting Inc. shares fell 25% on Thursday after the owner of a dozen television stations, including KCAL-TV Channel 9 in Los Angeles, said it’s no longer for sale because it doesn’t expect to fetch a sufficient price in the current market.

Shares of the New York-based broadcaster fell $11.50 to close at $34.50 on Nasdaq. Earlier, the shares hit a 12-month low of $28.75.

Broadcast stocks are down as much as 50% since June 29, when Young said it hired Lazard Freres & Co. to explore a sale and other options. Young’s shares have fallen 46% in the same period.

“It’s difficult to maximize shareholder value in gale-force winds,” said Bishop Cheen, an analyst at First Union Capital Markets.

The TV broadcaster was expected to attract several potential buyers for its flagship KCAL station and its group of middle-market stations in cities such as Nashville and Green Bay, Wis.

The Los Angeles station, the only independent station in the city, has done very well in the ratings, which will likely translate into a significant boost in cash flow this year and next year, said Jack Harvey, vice president at Blackburn & Co., which serves as a broker for TV station sales. That will make the station a more valuable property to Young, he said.

Officials at Young didn’t return calls for comment.

Young, whose stations reach 9% of all U.S. households, said it will continue to consider other alternatives, including a possible merger or consolidation. The company also said its board authorized the repurchase of as much as $50 million of its common stock in the open market.

Initially, Young was expected to fetch as much as $70 a share, or 14 times cash flow, Cheen said. That would have been in line with Chancellor Media Corp.’s $1.67-billion pending purchase of LIN Television Corp. and Hearst-Argyle Television Inc.’s $1.85-billion agreement to buy Pulitzer Publishing Co.’s nine TV stations and five radio stations.

“Clearly multiples are contracting. . . . The market is waiting for stability,” Cheen said.

He contends Thursday’s plunge in Young’s stock is an overreaction and he expects a rebound.

Potential bidders may have viewed the estimated price as too steep, especially since the stations have high operating margins and there may not be much room for cost savings, said Steve Pruett, senior vice president at Communications Equity Associates, which serves as a broker in TV station sales.