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Disney, Sinclair Broadcast Group, Byron Allen Close Regional Sports Network Deal

Dade Hayes

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Disney and Sinclair Broadcast Group have formally closed their $9.6 billion transfer of 21 regional sports networks once owned by 21st Century Fox.

In order to close its $71.3 billion acquisition of most of Fox, Disney agreed to sell off the RSNs so as to avoid monopoly issues given the scope of its ESPN holdings. The plan was laid out by the U.S. Department of Justice in a consent decree last year after Disney staved off Comcast to prevail in the bidding for Fox.

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After an auction process for the RSNs, Sinclair along with Byron Allen and private equity partners won control of the networks along with Fox College Sports. The networks, including Fox Sports West, Prime Ticket, Fox Sports Ohio and others, remain powerhouses even in challenging times for traditional TV. They control rights to 42 pro teams across all major sports as well as significant college sports rights, and the nature of live sports viewing can mean highly concentrated audiences and a steady flow of ad dollars.

At the same time, RSNs also occupy sometimes unstable ground as the pay-TV bundle has become strained. In the same way that ESPN on a national level has shed traditional subscribers as distributors balk at its escalating fees, local pay-TV operators have increasingly battled with RSNs over carriage. The networks have been dark on Dish Network for nearly three weeks in one such dispute, though they returned to Cox Cable systems after a settlement and also set a deal with Charter, the No. 2 U.S. cable operator. The LA Dodgers have the best record in Major League Baseball, but fans in their home market who are DirecTV subscribers have been unable to watch games carried by SportsNet LA for the past six seasons due to a carriage dispute.

Sinclair, meanwhile, now also has a stake in the jewel in the former Fox RSN crown, the YES Network. The company joined private equity investors and Amazon to secure broadcast and streaming rights to New York Yankees and Brooklyn Nets games in a $3.5 billion deal. The YES sale was handled separately from the other former Fox RSNs.

In the announcement Friday about the deal’s close, the parties noted the transaction assigned an enterprise value to the networks of $10.6 billion and an aggregate purchase price of $9.6 billion. The price is subject to certain adjustments, the companies said.

The RSNs were acquired via a newly formed, indirect subsidiary of Sinclair, Diamond Sports Group. Allen, who bought the Weather Channel and runs Entertainment Studios, is becoming an equity and content partner in a newly formed indirect subsidiary of Sinclair and an indirect parent of Diamond.

The purchase, transaction costs and an additional cash amount contributed to Diamond was funded through various means, according to the announcement. Sources included $1.4 billion in cash from Sinclair; $1 billion of preferred equity issued by a parent company of Diamond; a $3.3 billion loan taken by Diamond; and $3.1 billion of secured notes and $1.8 billion of senior notes issued by Diamond.

“We are very excited about the transformational aspects the RSN acquisition will have on Sinclair and are eager to bring those opportunities to life,” Sinclair CEO Chris Ripley said. “We welcome Jeff Krolik, President of the RSNs, and the rest of the RSN management team and staff to the Sinclair family. We have an exciting future ahead of us.”

Sinclair, the No. 1 owner of local TV stations in the U.S., is also forming a new RSN with the Chicago Cubs that is scheduled to launch in 2020.

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