There’s still no new benchmark for post-recession television multiples – as everyone awaits the outcome of the current Freedom Communications auction. But there has been some action in radio and LIN Media CEO Vince Sadusky told analysts Wednesday (3/16) the pricing appears to bode well for TV trading.
Saying it was difficult to handicap the Freedom sale, Sadusky did offer the opinion that it appears to be “a pretty robust process” and he added that money is available again at reasonable rates.
“That will be an important benchmark for the television industry. The radio transaction, I think, was a pretty good benchmark,” Sadusky said, obviously referring to the deal to sell Citadel Broadcasting to Cumulus Media. Citadel hasn’t yet reported Q4 financial results, but most reports see the price of $37 per share as north of nine times EBITDA.
“When you take a look at that multiple relative to TV – what we believe is TV’s growth prospects – and being greater than radio, especially when you think about the area of continued potential displacement, we feel very good about the television space,” Sadusky said.
As for his own M&A plans, Sadusky said LIN is opportunistic. “If there’s an opportunity to buy something that’s accretive, terrific multiple, great cost synergies, interactive revenue synergies, retransmission fee revenues synergies – all those great things – you know, we’ll take a look at it. Likewise, if the M&A market is very robust, we would look at doing some things the other way as well,” the CEO said.
There are no plans currently at LIN to either buy out or sell to NBCUniversal in their joint venture that owns the NBC stations in Dallas and San Diego. The recent acquisition of majority control of NBCU by Comcast has created a strange situation where NBCU is still the 80% owner of the joint venture, but General Electric is still responsible for 80% of any interest payment shortfall on the joint venture’s $815.5 million loan, with LIN covering the other 20%. The recent appraisal of the value of the two stations came in at about $565 million, putting the JV about a quarter billion bucks underwater with its debt.
One thing LIN doesn’t have to worry about with the JV is sharing retransmission consent fees with the NBC Network, except to the extent that NBCU is a co-owner. KNSD-TV San Diego and KXAS-TV Dallas have affiliation agreements that run to 2023.
RBR-TVBR observation: It is worth noting that LIN didn’t shy away from M&A when nearly everyone else was on the sidelines. Sadusky cut a shared service agreement with ACME for three markets and then exercised purchase options in two of them. That will likely prove to be pretty smart when we see what prices look like now that business is improving.