The Tribune Co. said yesterday it has agreed to purchase Los Angeles independent television station KTLA for $510 million in cash, the highest price ever for a single television station.
The purchase will give the Chicago-based media company independent television stations in the nation's three largest markets -- New York, Chicago and Los Angeles -- along with independents in Atlanta, Denver and New Orleans. It will make the Tribune Co., which publishes the Chicago Tribune and the New York Daily News and owns the Chicago Cubs, the nation's fifth-largest broadcaster, with TV stations that reach 19.6 percent of the U.S. television audience.
The Tribune Co. is buying the station from Golden West Television Holding Co., controlled by an investor group led by Kohlberg Kravis Roberts & Co. KKR, the New York-based firm specializing in leveraged buyouts, purchased the station in 1983 for $245 million. Morgan Stanley & Co. represented the seller in the deal.
"The Tribune felt they had to have this station for strategic reasons, whatever it cost," said one investment banker, who, along with many others on Wall Street, was somewhat surprised by the record price. "The question they asked themselves is, what do I have to pay to be 99 percent sure that I am the winning bidder. This is a classic textbook case of why selling a property in a one-shot auction where bidders are allowed to submit only one bid and do not know who the other bidders are produces the highest price."
The $510 million price exceeded the previous record of $450 million that Hearst Corp. recently agreed to pay Twentieth Century-Fox owners Rupert Murdoch and Marvin Davis for WCBV-TV, the Boston ABC affiliate they plan to buy from Metromedia. Murdoch and Davis agreed to acquire the Boston station and independent Metromedia TV stations in New York, Los Angeles, Dallas, Houston, Washington and Chicago for about $2 billion.
Sources said they believed the second-highest bid for KTLA was submitted by Cox Communications.
Tribune officials said the company might have to sell its Los Angeles Daily News and cable TV properties in the area to comply with Federal Communications Commission restrictions on ownership of media properties.
Media properties have been selling for record prices recently. Historically, bidders generally have determined the value of network affiliate television stations by multiplying the annual cash flow of the station by 10, using a slightly lower number to determine the value of independent TV stations. Sources said the Tribune Co.'s $510 million purchase price does not include the value of KTLA's accounts receivable, which presumably will be purchased separately, increasing the total value of the deal. Overall, Tribune Co. is paying about 14 times the latest 12-month cash flow for the station, sources said.
Tribune Co. Vice President Joseph A. Hayes said KTLA is the leading independent station in Los Angeles, whose coverage includes the California Angels baseball team and the UCLA Bruins basketball team. Hayes said if Murdoch and Davis purchase the Metromedia stations, they would have 21.6 percent of the nation's TV audience, followed by the three major networks, then Tribune Co., with 19.6 percent.