U.S.-based Sinclair Inc. (SBGI) has reportedly proposed a merger of its broadcast TV business with smaller rival Tegna (TGNA). The proposed deal, which could shake up the U.S. media sector, was first reported by The Wall Street Journal. Following the report, SBGI stock rose nearly 4% in pre-market trading on Tuesday, while TGNA jumped 9%.
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Both Sinclair and Tegna are media companies that own and operate local television stations across the U.S.
More Details About the Potential Deal
According to the report, Sinclair has proposed spinning off its Ventures division and merging its core broadcast TV business with Tegna. For context, the Ventures division includes non-traditional media assets such as the Tennis Channel and other investments. The deal would value Tegna shares at approximately $25 to $30 each, according to sources.
Earlier this month, Sinclair said its board had authorized a strategic review of the company’s broadcast operations, including a potential separation of its Ventures portfolio.
Hurdles Ahead of the Deal
Fresh interest in Tegna has emerged while the company is already in advanced talks to sell itself to Nexstar Media Group (NXST), according to reports earlier this month. Interestingly, Sinclair has a market value of about $1 billion but carries over $4 billion in debt, while Nexstar is valued at roughly $6.3 billion, making it a challenging competitor. Furthermore, sources argue that a potential merger between Sinclair and Tegna would face major hurdles due to their combined debt, making a successful closing challenging.
Meanwhile, Tegna has attracted takeover interest from multiple suitors in recent years. In 2022, it agreed to be taken private by hedge fund Standard General in an $8.6 billion deal, including debt, but the transaction collapsed after a series of regulatory hurdles.
What Is the Price Prediction for Sinclair Stock?
Turning to Wall Street, analysts have a Hold consensus rating on SBGI stock based on two Buys, two Holds, and one Sell assigned in the past three months. The average Sinclair stock price target of $18 per share implies a 27% upside potential.
Year-to-date, SBGI stock has declined by 15%.