LOS ANGELES — As RBR+TVBR reported Tuesday, one of the biggest discussion topics at the just-concluded 2018 Culture Marketing Council (CMC) annual conference is the possible acquisition of nearly all of Univision‘s AM and FM radio stations by Cumulus Media.
The chatter came just hours after Cumulus successfully emerged from Chapter 11 bankruptcy protection, reducing its outstanding debt balance to $1.3 billion from $2.34 billion.
Is there an ounce of truth to the rumors? RBR+TVBR talked to several brokers and D.C. communications attorneys, and then received a phone call from someone very, very close to the matter. All weighed in on the subject.
In the opinion of MVP Capital Managing Director Elliot Evers, any discussion of Cumulus acquiring more properties is folly.
“In our view, this is a pretty silly story,” Evers says. “Cumulus does not have the money, and Univision’s price expectations are out of line. It’s totally specious, in our view.”
Another leading broker, who requested anonymity, agreed. He suggested that the rumors started simply because of the presence of Andrew Hobson on Cumulus’ newly formed board, which became effective Tuesday.
Hobson served in various roles at Univision, including that of EVP/CFO, from October 2007 through his departure in February 2015.
Larry Patrick, head of Patrick Communications, has not heard any rumors regarding Cumulus’ consideration of Univision Radio. In fact, he says, “Buying more right now seems risky.”
Divestment seems more likely: He’s heard rumors that the new Cumulus Board of Directors is considering the sale of some of the former ABC Radio stations. Among these properties are KABC-AM in Los Angeles, WABC-AM in New York, WLS-AM in Chicago and KGO-AM & KSFO-AM in San Francisco. This was corroborated by another broker who asked not to be named.
What do Washington communications law experts have to say?
Most of the D.C. attorneys RBR+TVBR contacted had no comment. One reached out to Chris Wood, Univision’s SVP and Associate General Counsel for Governmental and Regulatory Affairs; no response had been received by RBR+TVBR‘s Wednesday news deadlines.
Fletcher Heald & Hildreth Managing Partner Francisco Montero, considered Washington’s go-to attorney for Hispanic broadcasters across the U.S. and Puerto Rico, had not heard the rumors prior to RBR+TVBR‘s Tuesday report.
What’s his take? “If it happened it would be a fascinating pivot for Cumulus,” he says. “I do believe that Univision has been reevaluating its commitment to radio for some time. That’s reflected in them letting go of most of their radio GMs in the past years to cut costs and consolidate market management—except for in Miami, where they kept Claudia Puig. Now, given the apparent increased turmoil at Univision, it may be possible that the option of getting out of radio, coupled with a possible needy suitor, might be well timed.”
‘A KNIFE TO A GUNFIGHT’
RBR+TVBR also reached out to several veteran Hispanic media executives for their input on the rumors. Do they believe Cumulus could be in the running for Univision Radio?
One high-placed individual who requested anonymity comments, “Cumulus brought a knife to a gunfight. They are totally overmatched in the big markets by iHeartMedia and Entercom. Yet, Univision Radio has a nice footprint in the top 10 markets. Univision Radio has underperformed over the last three years and they continue to lose value. It makes sense for Cumulus to purchase these assets and for Univision to use the profits to pay off debt.”
If a sale of Univision Radio were to transpire, and if Cumulus was the buyer, don’t expect a retention of the Spanish-language formats present on a good portion of those stations.
“The need is in English and the programming and sales synergies are in English,” the Hispanic media veteran said. “Andy Hobson is now on the Cumulus board. It makes sense to me. Say ‘Adios’ to Univision Radio.”
A group owner who spoke with RBR+TVBR about the Cumulus/Univision Radio possibilities is in line with Evers.
“This deal has zero percent chance of happening,” the radio broadcasting company owner believes. “Cumulus has 5.5x leverage. Their operations are in disarray. They lose money in the top 4 markets. Massive amounts of remnant inventory are propping up the performance, and that’s a temporary fix at best. The shareholders are the lenders. Getting the debt repaid has to remain the goal.”
‘IT DOES MAKE SENSE, AT SOME POINT’
Just as RBR+TVBR closed its business day on Tuesday, a call was received from an individual very close to the matter.
The source confirmed that the new Cumulus board coalesced on Tuesday, and that board members were selected independent of each other. As such, the naming of Hobson and former Border Media Partners head Tom Castro as Cumulus board members was not planned. Further, the source said, it has been many years since Hobson and Castro have even spoken to each other. For Cumulus, the selection of Castro by the lenders in charge of the board nominations had nothing to do with the common background of Hispanic radio management.
“One lender knew Andy; one knew Tom,” the source said. “It was his Time Warner connection that brought Tom top-of-mind.”
Meanwhile, the source confirms that there have been “zero discussions” with Cumulus’ board members on a possible deal with Univision. As the board would need to approve any such deal, this negates the belief of some CMC conference attendees that a sale of Univision Radio stations was just days away.
“It is correct to say that the fit is pretty good,” the source said. “It does make sense at some point, and on some business terms. But what Cumulus has to do is to figure out what to do next. There could be a tuck-in or a swap of stations. Any outright purchase would require an equity partner — and that’s not likely.”
So … where did the rumors of a Cumulus acquisition of Univision Radio come from, and why do multiple Hispanic advertising agency executives believe a transaction is on the way?
“Univision and their bankers are the ones juicing that,” the source close to Cumulus believes. “For Cumulus, it is simple: They don’t want to leverage up.”
RBR+TVBR affirms the validity of its sources through a rigid process that involves independent confirmation of a particular topic among multiple individuals who are considered experts in their field. For this story, a minimum of three unrelated individuals who offered the same insight and observations was used to prepare and finalize our reporting.