Economy HawaiiWritten by Havre On 07 May 2012
LIN Television to purchase KHON2

On May 4, LIN Television (TVL, NYSE, 52 week range 1.75 -5.21) filed a form 8K with the SEC (Securities and Exchange Commission) announcing that it had entered into a definitive agreement with New Vision Television to buy 13 networks affiliates in eight markets, including Hawaii’s KHON2, and provide services to five separately-owned network affiliates for $330 million in cash and the assumption of $12 million in debt.

LIN also announced in the 8K that it deposited $33.5 million in an escrow account and had entered into a commitment letter with JP Morgan for a bridge loan, which will convert at closing to the financing facility up to $265 million in debt to complete the purchase. The initial interest rate will be LIBOR plus 6.5 percent. (London InterBank Offer Rate for one-year maturity currently is just over 1 percent.)

This is a big purchase for the company considering LIN currently operates or services only 32 network affiliates. This purchase is basically a 50 percent increase. The company’s shares are trading at a market capitalization of approximately $200 million with revenues of about $400 million over the last 12 months. Thomson First/Call shows four analysts following the company and, prior to the announcement, one recommended a “strong buy,” two at “buy” and one “hold.”

Obviously, after careful scrutiny of the markets and the numbers, JP Morgan feels that it is a good opportunity for LIN. Despite a tough credit environment, JP Morgan is willing to risk over $250 million. With the deal not anticipated to close until the end of the year, it doesn’t factor in the huge amount of media buys going into this election season.

One thing is for sure: there won’t be very many changes in the local markets for the time being as they assimilate the new assets, maybe just some management and accounting consolidation. “If it’s not broke, don’t fix it.” At least for now.

LIN was founded in 1966 and is based in Providence, Rhode Island.

Full disclosure: I do a twice-weekly spot on KHON2’s Wake Up Today, and Hawaii Business magazine does a spot once a month.

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Randy Havre has a wealth of experience in the financial industry. In 1987, he established his own full-service stock brokerage firm, which was also registered with the SEC as an Investment Advisory Firm, managing money for the State of Hawaii’s pension fund, among other portfolios. In 1994, he started his first of three Hawaii based Venture Capital Funds. Additionally, he wrote a weekly stock column in the Pacific Business News for 21 years, taught Finance 315 Portfolio Management and Investment Strategies at the University of Hawaii for five years and is on KHON’s Morning News as a business/financial analysis twice weekly. Over the past nine years, Havre has been active in South America doing business development work for some of his portfolio companies, mentoring entrepreneurs and advising investors.

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