Randy Michaels back in radio as Emmis spins major market FMs


Will Randy Michaels be able to recreate the wizardry that catapulted him to the upper echelon of radio executives during his career? Investment gurus at GTCR seem to think so, and they’re using a wizard’s name to identify their new radio company – Merlin Media – which is getting one Emmis FM in New York and both of its Chicago FMs.

The station in New York is Alternative 101.9 WRXP-FM; and in Chicago, Merlin is picking up Alternative 101.1 WKQX-FM and Classic Rock 97.9 WLUP-FM.

The compensation package includes a cash payment, the amount of which includes options for Emmis, along with an ongoing stake in Merlin.

Here’s how it shakes out, in our estimation – Emmis has a choice of accepting between $110M and $130M in cash. Depending on the cash amount, it also will get a preferred equity stake of between $28M and $47M. And the equity stake will vary from 20% to 35%. What it comes down to is that Emmis has $20M of the purchase price to play with, determining whether to take it in cash, common equity or the preferred equity paying 8%.

A cash payment of $130M and an equity stake of $28M results in a $158M transfer in value to Emmis. On top of that, Emmis would still have 20% interest in the stations, which would put the total value at about $198M.

The Emmis fiscal year ends on the last day of February, and 2/28/11 marks the first time the trio of stations came home with positive broadcast cash flow in the last three years. In 2009, they lost $4.722M on net revenues of $24.402M; in 2010, they lost $2.074M on net revenues of $22.939M; finally, in 2011, they had positive cash flow of $2.526M on net revenues of $25.257M.

Emmis leader Jeff Smulyan commented, “While it is always difficult to part with stations that have been valuable contributors to our company, we believe that today’s transaction will create significant value for our shareholders. As a significant minority partner in Merlin Media, we’re delighted to remain engaged with these markets and stations in the exciting days ahead.”

“We are extremely excited about the opportunity to partner with Emmis and Randy,” said Philip A. Canfield, Principal at GTCR. “Emmis’s CEO, Jeff Smulyan, and Randy Michaels are both proven veterans of the media industry and we look forward to working with them to provide valuable media content to Merlin Media’s future consumers.”

GTCR is a private equity firm, and it uses what it calls “The Leaders Strategy.” That involves “…finding and partnering with exceptional leaders as the critical first step in identifying, acquiring and building market-leading companies through acquisitions and organic growth.” It would appear the company believes it has found such a leader in Michaels.

Chicago’s information central for broadcast news Rob Feder reports that insertion of Michaels into a leadership role at the stations there could result in the return to employment for members of his team who joined him recently in exiting Tribune, and could also result in an FM Talk format replacing the existing format on one or the other station.

In New York, Emmis retains two FMs – WRKS-FM and WQHT-FM.