Byron Allen’s media empire has everything riding on an $8B TV bet

Byron Allen’s media empire has every part using on an $8B TV guess

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Byron Allen, the Eighties comedian-turned-media-mogul who owns the Climate Channel, is angling to purchase an enormous chain of TV stations that have been previously owned by the Gannett newspaper big — and the end result may make or break his budding enterprise empire, based on some insiders.

Allen — who made headlines final 12 months when he took a racial-discrimination case in opposition to Comcast to the Supreme Courtroom, shedding the case however however wringing concessions from the cable big for his fledgling TV networks — is now eyeing an $8 billion deal to accumulate Tegna, a sequence of 64 TV and radio stations that span greater than 50 markets throughout the US.

Allen’s motives might have turn into clearer final week when Fox launched a 24-hour streaming climate app that media insiders say appears to be like like the idea for a brand new cable-TV channel. Fox Climate will doubtless have important leverage because it eyes a rollout given the clout of Fox’s information and sports activities channels — and the Climate Channel is in its crosshairs, sources stated.

To win Tegna, Allen must battle a on line casino magnate, a number of sources say.
Bloomberg by way of Getty Photographs

Fox’s app, which touts free always-on video streaming and 3-D radar, shall be broadcast from a newly renovated studio at its Midtown headquarters and can even take content material from native Fox stations across the US. “Fox’s community of dual-polarity Doppler radars, helicopters, reporters and information crews world wide lets us present you climate in a approach you’ve by no means seen earlier than,” based on its Web page — illustrating what the incumbent Climate Channel and Allen are up in opposition to.

Fox, which shares a standard proprietor with Information Corp., the writer of The Submit, declined to remark.

If 60-year-old Allen — whose Allen Media Group thus has amassed 33 native TV community affiliate stations — will get his arms on Tegna’s 64 stations, his bargaining place with cable giants may get a significant increase. Allen additionally may achieve leverage to promote cable corporations his different 9 fledgling networks together with Pets.TV, Comedy.TV, Recipe.TV and Vehicles.TV.

One downside: Allen is bidding for Tegna’s TV stations in opposition to the hedge fund Commonplace Normal, whose CEO Soo Kim owns the Bally’s on line casino empire and is teaming up in his bid with Apollo International Administration, the deep-pocketed private-equity big. They’ve already submitted a completely financed provide of $22 a share for Tegna, based on a number of sources. Tegna shares on Friday closed at $19.66.

Byron Allen in a sports jacket
Byron Allen got here to fame on the age of 18, when he co-hosted the discuss present “Actual Individuals” beginning in 1979.
Getty Photographs for Allen Media Group

That provide comes with its personal points — and will create a gap for Allen. Commonplace Normal earlier this 12 months launched an unsuccessful proxy contest to oust Tegna Chief Government David Lougee, pointing to allegations of discrimination and racial bias in opposition to Tegna, which Lougee denied. The Commonplace Normal-Apollo staff would push out Tegna’s present administration; Allen would hold them, based on sources acquainted.

However, sources stated Allen might face a good larger downside himself, which is that the Climate Channel’s enterprise took a significant hit in the course of the pandemic. As TV promoting dried up, Allen Media’s earnings fell from about $185 million to $130 million earlier than it closed in August on an acquisition of 10 stations from Grey Tv — giving it a modest increase, based on an individual aware of the corporate’s funds.

Because of this, Allen Media’s debt in current months has climbed to greater than seven instances its ebitda, a intently watched measure of profitability, sources near the state of affairs stated. That’s getting near a purple line the place Allen Media may break its debt covenant — and makes it more durable for him to safe financing for an formidable acquisition, the particular person aware of the corporate’s funds stated. 

Allen — who acquired a star on the Hollywood Stroll of Fame final week — already in recent times has tried to make a transformative acquisition and failed. In 2018 he wished to take part within the $4 billion public sale for Tribune’s tv stations and couldn’t line up co-investors.

Final week, Allen was reportedly speaking to Oaktree Capital Administration, Fortress Funding Group and Ares Administration about partnering on a last-minute bid for Tegna, sources stated.

The Tegna logo seen on a smartphone
Allen reportedly needs a controlling stake in Tegna — however he wants co-investors.
LightRocket by way of Getty Photographs

A sticking level for Allen is that his co-investors desire a massive stake in Tegna as a result of they’d be placing up a lot of the fairness. Allen needs to keep up virtually full management, sources following the state of affairs stated.

“I believe he’ll cave,” a supply near the state of affairs stated.

Allen made some lenders skittish after an audit they carried out this summer time confirmed he’d drawn a hefty compensation bundle from his firm, which had current annual income of round $600 million, at the same time as enterprise was declining, sources stated. Allen paid himself a complete compensation bundle of $50 million in 2020, based on sources acquainted.

Flagging Allen’s compensation, lenders charged him $40 million to permit him to borrow more cash to finance Allen Media’s roughly $1.5 billion in debt, based on sources aware of the matter. Allen Media is paying a blended rate of interest of round 7 %, sources stated. If it weren’t for the spending considerations, he would’ve been charged lower than $40 million, sources stated. 

Byron Allen in a jacket and tie
The fact going through Allen and different potential consumers is that Tegna may not even consent to a sale in any respect.
Getty Photographs for Bloomberg Businessweek

In the meantime, Bloomberg reported that Allen just lately borrowed $83 million to increase his Beverly Hills, Calif. property. Since 2018, he has purchased a lavish residence on Central Park South for $27 million, a sprawling chalet in Aspen, Colo. for $27 million, and one other property on the Hawaiian island of Maui for $23 million.

If Allen doesn’t shut the deal for Tegna, his mini-media empire may discover itself on shaky floor beneath the load of extreme debt, sources stated. The Climate Channel Community earns lower than 15 cents a month per cable subscriber and makes most of its cash from promoting, based on an individual aware of the state of affairs. (Allen Media operates the Climate Channel tv community and its streaming service. However IBM owns the Climate Channel model in addition to the location and the Climate Channel App.)

Nonetheless, Allen Media did nicely within the September “upfronts” the place media corporations promote airtime to advertisers, based on a supply aware of the circumstances.

However along with rival bidders, Allen faces uncertainty from Tegna itself, which has stated solely that it’s exploring a potential sale. Tegna, which had two sale processes in recent times that didn’t lead to a sale, stated final Wednesday it’s reviewing its “choices to create and return worth to shareholders.”

Allen and Tegna each declined to remark to The Submit.

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