Shares of Emmis Communications traded as high as $1.25, up 18% from Monday’s close, after announcement of a deal to sell a majority stake in three of its biggest market stations. Wells Fargo Securities analyst Marci Ryvicker is calling it a good move for Emmis.
The stock opened at the previous day’s close of $1.06 and actually dropped two cents before news circulated of the deal announcement.
Then it shot up to the day’s high of $1.25 before dropping back to a more modest gain. By the closing bell the stock was at $1.14, up 7.5% for the day.
“These are sticks,” Ryvicker told clients, so she discounted the value of calculating multiples, since such figures are not comparable to where radio stocks are trading. She noted that the three stations amounted to about 10% of Emmis net revenue in 2010 (the three total $25.3 million) and about 7% of the company’s EBITDA (just $2 million for the trio), so the EBITDA multiple, if it mattered, would be well over 80 times.
“Clearly, these are not a great read for valuations – but we do think this announcement is particularly good for EMMS given that it allows them to refinance their credit facility, which has been an overhang on the stock, in our view,” Ryvicker said.
Here is her “bottom line” on the deal: “While we cannot extrapolate a multiple from this deal for the rest of the space, we do think it validates the terrestrial broadcast business model and note that M&A has historically been a positive catalyst for broadcast stocks.”