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Fisher Communications shareholders want more from Sinclair to sell

By Sruthi Ramakrishnan

(Reuters) - Three minority shareholders of Fisher Communications Inc said a $373 million takeover bid by Sinclair Broadcast Group Inc undervalues the TV broadcaster and are looking to activist investor Mario Gabelli to derail the offer.

Sinclair, which describes itself as the largest television broadcasting group in the United States, said in April it would buy Seattle-based Fisher for $41 a share in cash to expand its operations in the western United States.

Fisher shares touched a high of $41.57 on Friday, after opening at $40.90 on the Nasdaq.

For the deal to go through, about two-thirds of Fisher's shareholders need to vote in favor at a meeting scheduled for Tuesday, August 6.

Three investors in Fisher, with a cumulative stake of more than 5 percent, said they believed Sinclair's offer undervalued the company. They declined to be identified because of the sensitivity of the situation.

Despite opposing the offer, two of them said they would be unlikely to vote against it unless a larger shareholder were to push for a higher price.

That investor would probably need to be Mario Gabelli, whose 26.3 percent stake in Fisher as of March 31 made him the company's biggest shareholder.

"We'd need somebody like him to do that for us to come (out) against it," one of the minority shareholders said.

Gabelli's Gamco Investors Inc bought Fisher shares in separate tranches last month, at time paying just above Sinclair's offer price, according to SEC filings.

Gabelli told Reuters that his investment team was still divided on which way to vote. Some of his fund managers want a better price while others want to take the deal on offer.

"I will make the decision pretty soon," he said. "If we vote against, we will file a 13D ... probably no later than Monday."

With acquisitions totaling about $2 billion in the last year, Baltimore-based Sinclair has been among the most active TV station buyers in a broadcasting industry boom.

Renewed interest in TV stations has been driven by revenue streams available from advertising and cable operators, who pay stations re-transmission fees to carry their channels.

Newspaper publishers Gannett Co Inc and Tribune Co announced acquisitions worth billions of dollars in the last two months to add heft to their TV operations.

Fisher owns 20 television stations in eight markets and three radio stations. It runs CBS and ABC affiliates such as KPIC TV, KCBY TV and KATU TV.

Seattle-Tacoma and Portland -- key markets for Fisher -- ranked 12th and 22nd, respectively, in Nielsen's latest local television market rankings based on market size. (http://link.reuters.com/dam22v)

On completion of the Fisher deal, Sinclair said it would be able to reach more than a third of U.S. households with a television.

"We are excited by Fisher's standalone prospects. We believe Fisher would be valued significantly above $41 (a share) if the Sinclair deal is voted down," a second investor told Reuters.

A fair distribution of the value created through a Fisher-Sinclair combination would be $48 a share, the shareholder said.

Gabelli, whose funds handle more than $30 billion in assets, has been pushing Fisher for about a year to consider a leveraged restructuring with funds borrowed from shareholders. (http://link.reuters.com/gef22v)

He has proposed the creation of a new company that could buy Fisher for $40 per share by issuing bonds to shareholders, and then distribute $36 in cash and one share of the new company to each Fisher shareholder.

Fisher declined to comment and Sinclair was not immediately available for comment.

Fisher's shares, which have risen 5 percent since the deal was announced, were trading at $41.40 in noon trade. Sinclair's stock, which rose 27 percent in the same period, was trading flat.

(Editing by Robin Paxton and Rodney Joyce)

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