Sinclair to Buy Dielectric as ‘Insurance’
Sinclair agreed to buy the assets of Dielectric, the largest U.S. antenna manufacturer, as “insurance” that the broadcaster’s TV stations can continue operating, said Sinclair Vice President-Advanced Technology Mark Aitken in an interview Tuesday. Dielectric parent company SPX announced the shuttering of the antenna manufacturer in April (CD May 7 p4). Aitken said his company paid an “immaterial and leverage neutral price” of “less than $5 million” for Dielectric, which will continue operations as a wholly owned subsidiary of Sinclair, and remain in its Raymond, Maine, headquarters. Though Dielectric had stopped taking new orders, Aitken said the company had been scheduled to continue operating into July before the sale. Aitken said over 120 of Sinclair’s 140 stations use Dielectric antennas.
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"We had to protect the value of our stations,” said Aitken. “It would be disingenuous to our shareholders to hope that someone else would come along and keep it open.” Other industry officials had said Dielectric’s shuttering could hurt broadcasters.
Sinclair had to preserve Dielectric because of the sensitivity of antenna design, said Aitken. “No two are exactly the same … you don’t just shove a part from someone else’s antenna onto another antenna.” Aitken said major repairs to antennas can run into the thousands of dollars, but replacing one can cost close to a million dollars. Sinclair CEO David Smith called Dielectric’s products “critical infrastructure,” in a news release.
The deal is a “defensive move that is good for the industry,” wrote Wells Fargo analyst Marci Ryvicker in an investor email. If Dielectric had been allowed to die, industry costs would rise, she said. “The only alternative providers of this equipment are foreign, so replacing equipment would've been much more expensive -- both in terms of pure cost, and revenue lost to longer repair times."
NAB and several antenna industry officials have blamed the FCC’s freeze on station modifications for Dielectric’s collapse, and Aitken called the freeze “the straw that broke the camel’s back.” But he said Sinclair expects the Dielectric purchase to be profitable. “The acquisition was a logical choice given our in-house RF engineering expertise and our ownership of Acrodyne Services, which installs and services broadcast transmitters and mobile DTV upgrades,” said Smith. Aitken said Sinclair thinks it will “get through this desert in front of us in terms of the freeze.” The incentive auction and subsequent repacking will be “a major opportunity for new antenna systems,” he said.
Dielectric competitor ERI said it’s positioned to take up Dielectric’s slack. “We have more than adequate capacity,” said Bill Harland, ERI vice president-marketing. NAB is “delighted that Sinclair has rescued an important American business that supplies two-thirds of the high-powered antennas for broadcasting,” an association spokesman said. He said NAB continues “to believe the FCC should lift the freeze on TV station modifications.”