Marci Ryvicker at Wells Fargo Securities has been looking at the final deal terms for Cumulus Media to acquire Citadel Broadcasting – and she likes what she sees. She said it validates the trading multiples of 8-10 times EBITDA for broadcast stocks – both radio and TV.
“Terms of the final deal values Citadel at roughly ~$2.4-2.5B. Based on management comments and investor expectations, Citadel was on target to produce $250M in EBITDA in 2010. Applying a 3% growth rate to this figure, it would be appropriate to assume that Citadel could generate roughly $258M of EBITDA in 2011. Without synergies, the deal multiple on this figure is roughly 9.3-9.7x. We have heard the buyside assume anywhere between $20M and $40M in synergies – which would peg a deal multiple at 8.6-9x or 8.1-8.4x, respectively,” Ryvicker said in a note to clients.
“In our universe, ETM [Entercom] currently trades at 9.4x 2011 EBITDA, CBS trades at 7.5x, TVL [LIN] at 7.1x and SBGI [Sinclair] at 7.9x,” Ryvicker wrote. She added in parenthesis, “GTN [Gray] trades at 11x but that is due to the significant debt load and is not a good comparison, in our view.”