Showing posts with label Emmis. Show all posts
Showing posts with label Emmis. Show all posts

Wednesday, June 29, 2011

Randy gets the old band together in Chi-town

Some of you may have seen my recent post on LinkedIn’s Radio/TV Station Buyers group:

“Randy Michaels is getting the old band back together in Chi-town. This time with a horn section. Second thoughts, Tribune?”

And Dick Taylor added on Twitter: “Horn section? More like a brass band. It will truly be the ‘noise you can't ignore.’"

Randy has his fans and detractors (I am solidly in the former camp), but whichever way you fall, there is no denying his impact on our industry. His return to station ownership after being unceremoniously dumped by the Tribune Board has attracted a lot of attention. And I believe that he will make a major impact in the Chicago and New York radio markets (and perhaps others down the road).

A number of industry heavy-weights have already joined the band. John Gehron is “Chairman, Advisory Board,” and Walt Sabo was named Chief Operating Officer. John was previously recruited by Randy to run the Chicago cluster for Clear Channel. In addition, Liz Aiello, former SVP of Broadcast at Martha Stewart Living Omnimedia, was recruited as Vice President, New York, and Andy Friedman as VP/Internet Initiatives. Friedman was most recently VP/Interactive Content at Tribune. Finally, Greg Janoff joins as EVP of Revenue; he was previously VP, Branded Entertainment Sales at MyDamnChannel/RAMP Video.

In true Randy Michaels style, Merlin Media has posted the following “Rules for Merlin Magicians”:

Rule # 1 – Use your best judgment.
Rule # 2 – See rule number one.

Merlin Media LLC is buying Emmis Communications’ WKQX-FM (101.1 MHz, Chicago, IL), WLUP-FM (97.9 MHz, Chicago, IL) and WRXP-FM (101.9 MHz, New York, NY). It is backed by GTCR, a Chicago private equity firm.

Our own Stephan Sloan did some good work analyzing this transaction. Steph reckons that the actual purchase price came in between $157 million and $158 million, payable as follows:

$110 million cash plus $47 million preferred equity, or
$130 million cash plus $28 million preferred equity

A number of different purchase price estimates have been floated in the press. The difference seems to rest with the valuation of the common equity kicker being retained by Emmis. We have no crystal ball for the potential future value of the common piece. If things go well with the operation, Emmis stands to reap the benefit of the ride. In our view, the purchase price represents full present value for the seller (Emmis) and is not in any way depressed. By the same token, if Randy can work his magic (again), he could build a lot of value quickly.

Prior to the announcement, we valued these stations at $155 million:

New York stick value: $71,000,000
Chicago stick value: $42,000,000

Though we were off by $1 million to $2 million, these valuations yielded stick values of $4.62 per pop in New York and $6.13 per pop in Chicago (based on the stations’ 60 dBu contours). We have been advising our clients for the last several months that stick values were running between $4 and $6, certainly in line with this transaction. And while a long way from the former high in the low $20, it is worth noting that the New York deal represents a full 50% increase over the last stick sale (WQXR) in the market.

Bottom line: I'm glad I don't work for Tribune.

Media Services Group

Monday, April 6, 2009

Grupo Radio Centro LMA's KMVN, Los Angeles (Emmis)

I have received some calls asking about the KMVN deal in Los Angeles. Grupo Radio Centro is entering into a long term (up to seven years) LMA for $7 million per year. GRC has the right to purchase the station for $110,000,000.

While the price is well below the high water market for a Los Angeles stick ($250,000,000), I believe that the price represents current fair market value. Here's my take. I look at stick deals through a technical lens, specifically an analysis of the population covered by the station's 60 dBu contour. Once you know the pop count, you can then apply a multiple. We have studied years of stick deals, and this model stands the test of time. Though I should point out that the appropriate multiple moves up and down with marketplace and credit conditons.

According to BIA, KMVN reaches some 14.664 million people in its 60 dBu contour. Divide that into the $110 million purchase price yields a "cost per pop" of $7.50 (almost to the penney). That number is the lowest in a long time, and a couple of bucks lower than the last FM deal in LAX. It is probably one-third of the high only a few years ago. But it accurately reflects today's marketplace. Both parties made a "fair deal."

That's my opinion; what's yours?


Tuesday, March 31, 2009

Cox Radio tender a hint of private market values

Cox Enterprises recently proposed to buy all of the outstanding shares (which they don't already own) in Cox Radio (CXR). The tender offer represented a 15% premium over the prior day's closing price. However, it also represented an opportunity for the prominent Atlanta family to take the company private at a historically low trading multiple. Estimates of the EBITDA trading multiple are in the low-5s. Remember that Emmis (EMMS) failed to go private at 10.9x just a few years ago. Multiples on other broadcast stocks are in the 4x range if you consider the fair market value of their deeply discounted debt.

So what does this say about private market multiples? One easy conclusion is that we're at the lowest multiples seen in decades. Private market multiples tend to be higher than public multiples, and I suggest that is the case today. Sellers are justifiably reluctant to sell into the current marketplace. But for those who have to, the Cox tender suggests that pricing will be on the lower end of my predicted 5x to 8x range in 2009.