Sinclair Won’t Pursue Standalone Separation of Ventures Business But Is Open to Broadcast M&A

After launching a strategic review last year, Sinclair has determined that it will not pursue a standalone separation of its ventures business, which has a variety of investments outside of its core affiliate station operations. “Certainly on paper, separating out ventures would create value, but it would also reduce strategic flexibility. So we concluded that we wouldn’t spin on a standalone basis,” CEO Chris Ripley told analysts on Wednesday. “But a spin merge is still a priority.” As Sinclair continues to evaluate M&A opportunities, CFO Narinder Sahai noted that the ventures business would continue to monetize its minority positions, redeploy capital into “return-seeking investments,” and invest in the growth of Tennis Channel and Digital Remedy. As for the station side of the business, Sinclair executives said that M&A has been “very vibrant” due to the FCC’s regulatory actions and that they continue to evaluate and see an opportunity in larger broadcast combinations. “In addition to our partner station buy-ins, we’ve acquired three different in-market station groups over the last 12 months, and we have many more in our pipeline across multiple counterparties within the industry,” Ripley said. “So I would say that side of the market is pretty constructive and the types of synergy opportunities that we’re seeing are very significant and that part of the market is already very vibrant.” Ripley said Sinclair is “ready and willing and able to jump on larger deals” and that there will be a “constructive environment” for that following a resolution to the lawsuit from a group of state attorneys general and DirecTV against the Nexstar-Tegna merger. “I do think that’s preventing some people from moving forward in a more constructive way. But otherwise, the regulatory environment right now is as good as it’s ever been,” he said. “We’re looking forward to not only market optimization opportunities, but the larger deal market freeing up here shortly.” In addition to the remarks on the M&A environment, Ripley called for a “rebalancing” in its upcoming renewal negotiations with the major networks. The company has already completed renewals with ABC and CBS and are in the midst of negotiations with Fox. “Since our last renewal round, all of the networks now have streaming platforms, including Fox, and there needs to be a rebalance between how much is paid for this content by the streaming side of the house and within the linear side,” Ripley said. “So that is the core issue at hand and I think we’re having very good success bringing that to the networks in those negotiations.” The company’s deal with Fox will come up for renewal in December, while a “significant portion” of its MVPD subscribers come up for renewal next year. During its third quarter, Sinclair’s total revenue grew 33% to $893 million and the company posted a profit of 60 cents per share, smashing Wall Street expectations of $876.8 million on a profit of 5 cents per share. Political ad revenue grew 55% to a record $136 million, while core ad revenue fell 4% to $301 million. Distribution revenue grew 1% to $426 million. Looking ahead, political revenue is expected to hit approximately $455 million for 2026, besting the $405 million in political revenue in 2024 due to strong demand across its footprint driven by the midterm elections. Sinclair also narrowed its advertising revenue guidance to $1.22 billion to $1.25 billion and distribution revenue to $1.74 billion and $1.78 billion. Adjusted EBITDA is expected to come in between $825 million and $835 million, driven by the political outlook and continued cost discipline. The company will provide full-year guidance for 2027 next quarter, but noted it will not have the benefit of the Olympics or the World Cup. Executives also cited some uncertainty around the MLB season given ongoing labor negotiations and the full-year effects of an affiliation change in St. Louis and the Charter-Cox merger.