Jeff Smulyan will use sale to refinance Emmis (audio)


Emmis Communications CEO Jeff Smulyan says it is painful to sell three of the company’s big market stations but it was necessary so Emmis can do a refinancing. He’s hoping that Randy Michaels will build Merlin Media into a big company, which is why Emmis is taking equity in Merlin as part of the deal with Michaels and the GTCR private equity group.

“If I could have done it without selling anything I would have, but I couldn’t get there,” Smulyan told RBR-TVBR. But Emmis needs to refinance its debt. It recently got a financial lifeline from Canyon Capital, which eliminated a September 1 deadline, but Smulyan wants to do the refinancing sooner, not later, because he believes Emmis can get better rates.

Smulyan didn’t disagree with RBR-TVBR’s calculation from his company’s SEC filing that the total value of the three-station deal is approximately $198 million – but he says the number could be a lot more if, as he expects, Randy Michaels builds Merlin Media into a big company. That’s why Emmis is holding onto a stake in the new company. In fact, the deal gives Emmis some flexibility on the cash/equity split at closing and Smulyan wants to take only as much of the $110-130 million cash as necessary for the refi and maximize the equity stake in Merlin.

You will be surprised at one of the names involved in this deal. We asked Smulyan how the deal came about. “Randy and I talked about it a while ago. Reed Hundt is an advisor to GTCR and he approached me on their behalf. One thing led to another and there you have it!” Smulyan told us. Yes, that Reed Hundt, the former Chairman of the FCC.

Smulyan spoke with us on a cell phone from a plane as he was preparing to leave New York. The audio cut begins with him explaining why the deal was structured for Emmis to hold onto equity in the three stations as well as taking cash.


“I’ve known Randy for a long time. We’ve been friends for 30 years. I think he understands this business and does as well in this business as anybody I’ve known. And so we have no problem having a piece of it – none whatsoever,” Smulyan said of the investment in Merlin.

Once this deal is done and Emmis does its refi, Smulyan indicated that he hopes to line up new financial backing to grow Emmis, so we may look for activity from both Smulyan and Michaels as M&A heats up.

RBR-TVBR also sought an interview with Randy Michaels, but we’re still waiting to hear from him.

RBR-TVBR observation: It is a very complicated deal, but gives Jeff Smulyan what he has to have – a way to refinance Emmis.

From our point of view, radio is always more fun when Randy Michaels is in the game. We’re trying to imagine Randy sitting around smoking cigars and playing poker with Reed Hundt, but that image just won’t focus. Hey, maybe the ex-Chairman has changed!

On the serious side – from where RBR-TVBR sits and viewing the radio business we trust that Randy Michaels and his Merlin Media will be able to perform magic in the multiplatform arena.

Radio needs to see a leader rise above the ignorance of today’s real digital multiplatform world. Terrestrial radio will not go away but only see its share of the pie shrink.

Radio has to aggressively address the mobile broadband space that could potentially be a game changer for radio.- RBR/TVBR has reported numerous players in the space.

Point: Major cellular companies are re-fitting their data networks to offer 4th generation wireless broadband services that will more than double the download speeds in mobile devices and put more broadband in more places, the auto industry is not too far behind.

That technology is coming fast and furiously to the auto market, but the next step from there is how that affects radio.

With real high speed internet becoming cheap and available in the car, the value of the web stream radio stations produce may become more valuable that the transmitted terrestrial signal and a shift from over the air to over the net may be coming faster than anyone wants to admit.

Much as satellite radio has addressed signal quality and the reach issues – web streaming to the car dashboard is real, it’s cheap and it’s coming, mainly because tech savvy car buyers want it. RBR-TVBR has stated for the past 3-1/2 years ‘Technology waits for no one.”