Tribune Co said on Monday that it would acquire 19 television stations from Local TV Holdings LLC for $2.73 billion in cash, making it the largest TV broadcaster in the United States.
The purchase from New York private equity firm Oak Hill Capital Partners is another step for Tribune, the publisher of the Los Angeles Times, the Chicago Tribune and The Morning Call in Allentown, in transforming itself largely to a broadcast company as it seeks to sell off its newspaper division.
Tribune, which currently has 23 television stations and eight newspapers, emerged from bankruptcy protection in December . With Local TV, Tribune will now have stations large markets like New York, Los Angeles, Miami, Cleveland, Denver and Seattle and will reach the most households in the United States.
The company said the acquisition was especially important for its WGN America, a national feed of its Chicago TV stations that it repackages as a superstation and distributes through cable and satellite to more than 76 million homes.
Besides advertising revenue, TV stations get retransmission fees from cable companies looking to broadcast their programs on local TV.
"Retrans is a growing stream of revenue," said Benchmark Co analyst Edward Atorino. "Internet revenue a few years ago was peanuts; now it's getting into tens of millions of dollars. Mobile TV revenue is on the horizon."
Tribune is the latest company to snap up local TV stations as the industry consolidates. Last month, Gannett Co, the largest U.S. newspaper chain, announced a deal to buy Belo Corp and its 20 local TV stations for $1.5 billion.
"Clearly there is a belief out there that TV stations are here to stay despite some skeptics," Atorino said.
Tribune's broadcast stations reported 2012 revenue of $1.1 billion in 2012.
In 2007, Oak Hill bought nine network-affiliated TV stations from New York Times Co for $575 million, and in 2008 it bought eight Fox network-affiliated stations from 21st Century Fox for about $1.1 billion.
Tribune said it had received financing of up to $4.1 billion from JPMorgan Chase & Co, BofA Merrill Lynch, Citigroup Inc, Deutsche Bank AG and Credit Suisse Group. This includes a new $300 million revolving credit facility and the capacity to refinance existing debt.