Young Broadcasting Inc., the owner of KCAL-TV in Los Angeles, has agreed to buy KRON-TV, San Francisco's most widely watched TV station, for $823 million in stock and cash, beating out NBC Inc.'s bid of slightly more than $700 million.
The purchase from Chronicle Publishing Co. would be one of the richest deals for a television station in recent years, highlighting the continuing run-up in prices for broadcast outlets despite uncertainties over the future of the industry.
Analysts say it is a risky gambit for Young, which just six months ago was considered a takeover target--too small to compete in an industry consolidation led by majors such as NBC, CBS and Fox.
"They have taken an amazing risk," said Dave Smith, president of Frank N. Magid, a TV research and marketing firm in Los Angeles.
Young owns 11 TV stations, mostly in mid-size and small markets such as Nashville; Albany, N.Y.; and Richmond, Va.
Smith said the purchase of KRON, along with its ownership of KCAL Channel 9, makes Young overly dependent on the California economy.
NBC had been expected to win the bidding because of KRON's affiliation with the network. Some analysts said that the station might have fetched an even higher price had NBC not played hardball with Chronicle Publishing, which recently sold its flagship newspaper to Hearst Corp., owner of the rival San Francisco Examiner.
NBC threatened to stop paying KRON $8 million a year for carrying the network's programming when the station's current affiliation pact ends in two years. Sources said NBC also aggravated Chronicle Publishing by threatening to put its network programming on a rival San Francisco outlet unless its initial bid of $650 million for KRON was accepted.
Some sources say NBC's final bid of about $725 million was superior to Young's because it was all cash, but that Chronicle Publishing favored Young because it resented NBC's strong-arm tactics. Young's offer includes $650 million in cash and $173 million in stock. Young's shares slid $4.78 Tuesday to close at $47 on Nasdaq.
The sale also includes a 51% interest in BayTV, a cable news channel.