RBR-TVBR Analysis:
It goes without saying that the $505M four-market 17-station deal sending Bonneville stations to Hubbard is one of the biggest radio station deals in years. Peter Handy of Star Media Group believes it may be the biggest transaction involving privately-owned companies for years to come. We’ll see about that, but there is no doubting one thing: It’s big, and Hubbard instantly becomes a radio group to be reckoned with.
It brings an AM and two FMs in Minneapolis-St. Paul to the table, in Arbitron market #16, and adds #3 Chicago, #9 Washington DC, #21 St. Louis and #28 Cincinnati to the mix.
According to Handy, the fact that Hubbard was the buyer is one of the big reasons the deal was done. “Bonneville has been approached by radio broadcasters for years to sell the company, and they have said no repeatedly to suitors,” he observed. He said that it demonstrates “…Bonneville’s belief that they found a buyer that would run the stations the way they do. They couldn’t have found a better buyer.”
Handy said that for executive Bruce Reese, who will be moving from Bonneville to Hubbard along with the stations, it will be “as close to still working for Bonneville as possible.”
Hubbard’s Ginny Morris noted that the company was “in a great position to expand selectively.” Handy observed that they have plenty of “dry powder” with which to enter the market.
As we noted in our previous article, sources are placing the deal’s multiple on or around 8, and broadcast analyst Dave Schutz of Hoffman Schutz came up with another metric estimating the value of the deal.
He noted that 14 of the stations being sold are full-market FMs, and after allowing for AM and suburban signals, he pegs the deal at $11.35 per person reached. “While the $11.35 metric is below the $20-$25 per-person that were seen at the peak in 2005, it is substantially above the $5.00 metrics that have been common in the few and sporadic sales that have taken place in the past two years.” He added, “This sale, particularly as it relates to Chicago stations, serves as a benchmark for the value of the Emmis stations.
Hubbard has mainly been a player on the television side. It’s only currently-owned radio cluster is in Minneapolis-St. Paul, where it owns and operates AC KSTP-FM 94.5, Sports KSTP-AM 1500 and Talk KTMY-FM 107.1. KSTP-FM is by far the strongest performer of the three, but is back in the pack trying to break into the top 10 in the Arbitrons.
The four Chicago stations (essentially comprising three different radio operations) all hover around the #10 Arbitron rank. They include WDRV-FM 97.1/WWDV-FM 96.9 “The Drive,” which Bonneville describes as “Timeless Rock for Adult Men”; WTMX-FM “The Mix” 101.9, which aims for the ears of 18-34 females; and WILV-FM “Rewind” 100.3, which focuses on music from 80s with other selections mixed in.
The crown jewel of the sale may be iconic Newser WTOP-FM 103.5 in Washington DC, along with its simulcast on 107.7 MHz and 1050 kHz. That station is always a threat to top the Arbitrons rating charts. Also included there is a niche operation that could only exist in Washington: the WFED Federal News Radio simulcast, available at 1500 kHz and 820 kHz. Washington has the only audience for this operation in the world, but its specialty programming is not ever going to make an impact on the ratings.
In St. Louis, Adult Hits WARH-FM 106.5 “The Arch” is one of the top-rated stations in the market, and Country WIL-FM 92.3 isn’t too far behind. WXOS-FM 101.1 brings Sports to the FM dial, and is farther back in the ratings pack.
Hubbard is getting two top contenders in Cincinnati: Country WUBE-FM 105.1 and Hot AC WKRQ-FM 101.9. Another Rewind 80s station, WREW-FM 94.9 holds its own, while New Country WYGY-FM 97.3 should be considered a work in progress.
RBR-TVBR observation: This is the second big deal of 2011. The other was on the TV side, a $74M sale of four network affiliates by Community Newspaper Holdings Inc. to Southeastern Media Acquisition. Bonneville-Hubbard eclipses that sale by a factor near seven.
Are the deals a signal that the trading market is starting to loosen up? Hard to say, but we know one thing for sure – at least one company, Hubbard, has its eyes open.
The fact that it moves the price point trend arrow up out of the cellar is perhaps the most encouraging aspect of the transaction.
Handy speculated that Hubbard will be fielding phone calls from brokers far and wide. We figure that the brokers representing prospective sellers with developed properties in sizable Midwestern markets will be particularly interested in paying a visit to the Twin Cities to peddle their wares.
RBR-TVBR note: One combo that stands out is Washington, DC’s WTOP. Lesson for all in radio is examine their multi-platform operation, including what WTOP is doing with the internet.
Lot of moving parts on this deal for (much has to do with a new Bonneville chairman and his views of where he sees Bonneville growing). With the current team leading Bonneville, going with this deal is the important factor.
Key intangibles of this business transaction:
Benefit: These Bonneville stations have historical performance: No need to just rely on pro forma or projections as it was easy to demonstrate and see a successful growth pattern.
Bottom-line: Combo stations like WTOP solid, not jumping format ship but building a multi-media platform which includes the internet.
Staff: All employees including upper management staying with this deal is vital. The team is comprised of highly trained broadcast professionals.
The staff is the most valuable asset, the foundation and springboard for growth with their experience to help train new hires. In short, the entire business that Hubbard purchased doesn’t rest on one person’s shoulders.
Infrastructure: With Bonneville staff moving with the transaction the infrastructure is in place and positioned for growth for new products and services in today’s digital environment.
It is not just asking – Hey, what was the multiple?…Examine the entire structure.
See related reports:
Bonneville selling four markets to Hubbard
Hubbard growing in radio after decades on the sidelines
