Calling the McGraw-Hill Broadcasting stations now up for sale a “well managed group,” media investment banker Michael Alcamo tells RBR-TVBR he expects the properties to command a strong multiple in today’s market. And he expects to see quite a few would-be buyers bidding for individual stations, rather than the entire group.
McGraw-Hill is selling while the stations are doing well. The group was the top performer among publicly traded TV companies in Q1, according to a recent analysis by M.C. Alcamo & Co. Revenues for the quarter were up 10.2% — the most of any of the companies tracked by the investment banking firm and well ahead of the 1.2% average.
But since TV is such a tiny part of McGraw-Hill, the company doesn’t disclose the group’s profits, just revenues. So we know that full year revenues for 2010 were $96 million, up 18.3%. So, pick your cash flow margin and you can see a price approaching $400 million. McGraw-Hill was reported to have paid $50 million for the four stations in 1972 when they were purchased from Time-Life. Other than adding some LPTVs in its markets, McGraw-Hill never expanded in television.
“The stations are potentially more interesting to individual buyers individually than they are as a group,” Alcamo said, although he didn’t rule out someone like Hearst Broadcasting, already the largest ABC affiliate group, being interested in all four. But what’s not as likely in the current financing marketplace is for a private equity fund to back an operator in buying the entire group. “I think that the syndication market is a little bit rocky, a little bit uncertain right now,” Alcamo said of a private equity-backed deal trying to borrow a quarter billion dollars to launch a new TV platform company.
But for the individual stations, several operators in the East and Midwest might be interested in acquiring WRTV-TV (ABC) Indianapolis, while others with a Western footprint might want KMGH-TV (ABC) Denver and KGTV-TV (ABC) San Diego. Operators focused on smaller markets might be in the bidding for KGTV-TV Bakersfield, CA. “I don’t think that an expectation of 10x [10 times cash flow] is inappropriate for any of these assets individually,” Alcamo said.
“It’s a very well managed group and I think the group will see strong interest, either individually or as a whole,” Alcamo said.