Oak Hill Said to Reap 240% Gain in Sale of 19 TV Stations

Oak Hill Capital Partners, the private-equity firm backed by Texas financier Robert M. Bass, will reap more than a 240 percent gain selling Local TV Holdings LLC to Tribune Co. (TRBAA) for $2.73 billion, a person familiar with the matter said.

Tribune, a Chicago-based media company, said today that it would buy all 19 television stations owned by Newport, Kentucky-based Local TV. The all-cash purchase would be the biggest U.S. broadcasting deal in six years.

Oak Hill, based in New York, owns about 95 percent of the holdings, said the person, asking not to be identified because the information is private. Including about $530 million it already has made in dividends, Oak Hill will garner more than $1.7 billion, or 3.4 times the firm’s $493 million equity investment, the person said.

“Oak Hill did a very good job working with management to improve margins by cutting back expenses, and doing better than their peers in core revenues,” said Carl Salas, a senior analyst at New York-based credit rater Moody’s Investors Service. “They outperformed the industry.”

James David, a spokesman for Oak Hill at Kekst & Co., declined to comment on the transaction.

Oak Hill, which manages more than $8 billion in assets, created Local TV in 2007 to buy nine television stations from New York Times Co. for $575 million. In 2008, it bought eight stations from News Corp.’s Fox Television Stations arm for $1.1 billion. Both deals were financed mainly with borrowings. It later added two more stations.

‘Going Directly’

The group will almost double Tribune’s stable of stations to 42, the company said in a statement today. The Local TV assets include 16 markets, with top-rated stations in Denver, Cleveland and St. Louis, the companies said.

Local TV has expanded its advertising base by “going directly to advertisers and bypassing the usual agencies to place ads,” according to Salas. The company’s earnings before interest, taxes, depreciation and amortization -- a standard yardstick of financial performance -- is about $250 million a year based on an average of last year’s results and this year’s estimate, according to Salas.

That represents a profit margin that has risen to about 40 percent from 33 percent in 2009, he said. Salas used an average because Ebitda for TV companies tends to rise during election years.

Oak Hill, which was created in 1999 with Bass as the lead investor and traces its roots to the mid-1980s, has backed acquisitions of restaurant operator Dave & Buster’s Inc., drugstore chain Duane Reade Inc., business-services outsourcing firm Genpact Ltd. (G) and aerospace-products maker Firth Rixson Ltd.

It completed raising its latest fund, at $3.8 billion, in 2009.

To contact the reporter on this story: David Carey in New York at dcarey13@bloomberg.net

To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net

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