In the latest of its ever-present dealmaking machinations, Blackstone has reportedly injected itself into two high-profile sagas: The ongoing sale process of television broadcaster Tribune Media (NYSE: TRCO) and the restructuring of clothing retailer J. Crew.
The first move is driven in part by the US government’s plans to ease restrictions on media ownership in the country, while the second is a play to provide J. Crew more flexibility with its debt—and to perhaps help the company avoid bankruptcy entirely.
Blackstone’s efforts to buy Tribune, which owns a reported 42 TV stations and has a market cap of roughly $3.3 billion, are being conducted in conjunction with 21 st Century Fox, according to various media reports. For Fox, the appeal is obvious: A chance to increase its holdings in the space by 150% and gain more leverage in negotiating rights deals. Blackstone and Fox’s reported bid is a counter to an earlier offer by Sinclair Broadcasting (NASDAQ: SBGI).
The possible deal comes less than two weeks after the US Federal Communications Commission voted to reinstate the “UHF discount,” a measure that allows broadcasters to own a larger slice of the airwaves; just eight months prior, the regulatory body had voted to eliminate the provision. The reinstatement of the rule clears the runway for more broadcasting mergers than before—and Blackstone and 21 st Century Fox are quickly trying to take advantage.
They likely won’t be alone. Private equity interest in the US media and information services sector has been on the rise in the past four years, with deal count climbing from 124 in 2013 to 162 last year, according to the PitchBook Platform. Nearly 50 deals have already gone down in 2017.
US PE deal activity in media & information services (B2B)
Source: The PitchBook Platform
The New York-based Blackstone’s other new play is similarly strategic. GSO Capital Partners, Blackstone’s credit arm, already owns part of the reported $2.1 billion in debt accumulated in recent years by J. Crew. With Reuters indicating that GSO has agreed to buy up even more of the retailer’s debt, Blackstone seems to be doubling down, attempting to acquire a majority of J. Crew’s arrears in order to increase the company’s ability to restructure.
J. Crew would like to put its intellectual property into a new company in order to cut its current debt burden, but current shareholders of that debt including Eaton Vance Management and Highland Capital Management are understandably reticent, according to Reuters. If Blackstone buys up enough of J. Crew’s debt obligations, the firm could allow the company to split itself up without legal risk and, in the process, improve J. Crew’s chances of avoiding Chapter 11 bankruptcy. J. Crew has been a private company since it was acquired by TPG and Leonard Green & Partners for some $3 billion in 2011.
Want to learn more about J. Crew’s recent struggles? We recapped it all right here.
Article by Kevin Dowd, PitchBook