More Sinclair

An article from the Washington Post:

Copyright 1996 The Washington Post
The Washington Post

November 25, 1996, Monday, Final Edition

SECTION: FINANCIAL; Pg. F27; WASHINGTON INVESTING

LENGTH: 1312 words

HEADLINE: At Sinclair Broadcasting, a Series of Setbacks

BYLINE: Jerry Knight , Washington Post Staff Writer

BODY:

Sinclair Broadcasting Group Inc. was going to be television's big hit this season, the hottest thing to come out of Baltimore since the NBC series "Homicide: Life on the Streets."

Taking advantage of the Federal Communications Commission's decision to loosen limits on the number of TV stations a company can own, Sinclair became the nation's largest independent broadcasting chain earlier this year, wowing Wall Street as its stock shot from $ 21 a share to $ 48.50 last summer.

But investors can change channels as quickly as TV viewers, and this fall they've clicked off Sinclair's stock. Since mid-October the shares have fallen faster than one of David Letterman's bad jokes, thudding from $ 43.75 a share to $26.25 at the close of Friday's trading on the Nasdaq Stock Market.

The slide has slashed the value of investors' Sinclair holdings by more than $100 million and prompted Sinclair to withdraw plans to sell 6.25 million additional shares.

As Sinclair shareholders have watched the stock fade, they've seen two brothers who are top Sinclair executives playing roles straight out of a couple of late-night reruns.

In a scene that could have come from "Wind in the Willows," corporate secretary J. Duncan Smith, 42, recently auctioned off a 19th-century Calvert County manor house called Toad Hall, which he bought on a $ 2 million whim and sold for a $ 200,000 loss after visiting the place a total of eight times.

Like the peripatetic Master of Toad Hall in Kenneth Grahame's furry tale, Smith arrived for the auction in a raucous infernal machine -- in this case, a helicopter rather than Mr. Toad's motorcar.

Mr. Toad's wild ride might also be an apt metaphor for the incident involving a company-owned Mercedes Benz and brother David Smith, Sinclair's chief executive, though as Baltimore police describe it, it was more like a scene from "Homicide."

Smith, 44, was arrested Aug. 14 by Baltimore undercover officers and charged with a misdemeanor sex offense involving a female prostitute. Smith, who is married and has children, has not appeared in court or entered a plea. Sinclair issued a statement saying the incident "is unrelated to our business."

The episode made headlines in Variety, the entertainment industry daily, and several broadcasting industry publications. It generated a profile in Forbes magazine and focused attention on Sinclair's little-noticed growth into one of the nation's longest chains of broadcasting properties.

Sinclair Broadcasting's properties are not big, but there are a lot of them -- 28 television and 33 radio stations, mostly in medium-sized cities such as Pittsburgh, Milwaukee, San Antonio, Des Moines and Columbus, Ohio. Only five of the stations are affiliates of the Big Three networks. Typical are Sinclair's Baltimore stations, Channel 45, a Fox network affiliate, and Channel 54, a former independent that now carries UPN network programming.

Sinclair's corporate strategy, widely praised by Wall Street analysts, is to move as rapidly as possible to take advantage of the FCC's decision to remove limits on the number of stations a company can own.

From four stations just four years ago, the company has grown steadily by buying other independent stations. Sinclair broke into the big leagues of broadcasting last spring with the $ 839 million acquisition of River City Broadcasting, a St. Louis company with 10 TV and 31 radio stations.

To finance his expansion strategy, CEO Smith converted Sinclair from a family-owned business into a public corporation. The company raised $ 100 million with an initial public stock offering in July 1995 by selling 5 million shares for $ 21 a share. It also has sold more than $ 300 million worth of high-yield bonds and plans to sell additional securities at some time in the future.