To the surprise of no one, Cumulus Media on Monday afternoon announced that it is selling venerable Rocker KLOS-FM 95.5 in Los Angeles to locally owned Meruelo Media.
The sale price may have been the most surprising aspect of this deal.
At the same time, a swap with Connoisseur Media was had. The asset purchase agreement for this deal has been filed with the FCC, and it shows who brokered the deal, along with the well-known legal counsel involved.
In Southern California, KLOS is being sold to the division of Meruelo Group that also owns KWHY-22 and KBEH-63 and venerable radio stations KPWR-FM “Power 106” and KDAY-FM 93.5 for $43 million.
Moelis & Co. served as Cumulus’ broker in the deal, with a $5 million escrow payment made to Commonwealth Land Title Company on behalf of Meruelo.
That’s a bargain compared to what Meruelo paid Emmis Communications for Power 106.
While some industry observers are fretting that the “low” sale price for KLOS will ravage future valuations for brokers, buyers and sellers, a source close to the matter says the deal makes sense for both Meruelo and Cumulus Media.
“The price is reflective of the amount of EBITDA — or said otherwise, cash flow — that a station generates multiplied by the ‘multiple,'” the source said. “The reason that Power 106 sold for more is simply that it that did much more cash flow.”
But, how much cash flow Power 106 actually did under Emmis ownership was not revealed. “There is no way to tell if the multiple Cumulus got was relatively better or worse than their multiple,” the source said. “The two situations aren’t comparable.”
According to one L.A. market observer, KLOS “must have been down to three to four times cash flow and Meruelo paid 10x cash flow.”
David Schutz, President of Seattle-area Hoffman Schutz Media Capital, also did the math.
“The sale of KLOS marks a new low in the population pricing metrics for major market FM stations, particularly for a station with an established brand identity,” he tells RBR+TVBR.
As a grandfathered “Super Class B” facility on Mt Wilson, KLOS’s 60-dbu contour covers 16,436,000 people. With the $43 million sale price, this works out to a population metric of “only” $2.62/PP, Schutz says.
“In comparison, Cumulus’ sale of what was essentially a license only for WPLJ-FM 95.5 in New York had a metric of $3.39/PP,” Schutz says.
Emmis’ May 2017 sale of KPWR had a metric of $6.01/PP, he adds.
What does this mean for possible other deals in the market? The observer RBR+TVBR spoke with argues that Salem Media Group has an opportunity to acquire some of Cumulus’ underperforming AM stations — namely KLOS’s now-former sibling, once No. 1-rated KABC-AM 790 and Gotham Talker WABC-AM in New York, the No. 1 station in America from 1964 through 1977.
“Salem should buy KABC and move [Christian Talk and Teaching] KKLA-FM 99.5 to the 790 kHz signal,” the market observer says. “They could make the same money and then sell the 99.5 MHz signal to pay off some debt.”
Who could buy another station in the Southland? Meruelo.
As RBR + TVBR reported in April 2017, Meruelo received $123,474,177 for giving up the spectrum associated with its KWHY-22, which has a channel-sharing arrangement in place. KWHY is the oldest continuously running Spanish-language TV station in the U.S.
Meruelo also owns KBEH-63 in the Oxnard-Ventura, Calif., area — a part of the vast L.A. DMA.
Meanwhile, Cumulus has engineered a swap with Connoisseur Media that will, on paper, be highly accretive for both companies.
Connoisseur Media is shedding 50kw Class B Classic Hits WODE-FM 99.9 “The Hawk” in Easton; Class A Alternative WWYY-FM 107.1 “Spin Radio” in Belvidere; FM translator W234AX; and Class C WEEX-AM 1230 in Easton and WTKZ-AM 1320 in Allentown, which simulcast as “FOX Sports Lehigh Valley.”
In exchange of these stations, Connoisseur will be getting two prized possessions in its own backyard: 50kw Class B AC WEBE-FM 107.9 in Westport, Conn., and heritage Class B News/Talker WICC-AM 600 in Bridgeport, Conn., along with FM translator W297CP in Bridgeport.
How did the swap transpire? There was a brokerage involved, and that would be MVP Capital, which represents Cumulus. That’s the San Francisco-based operation housing such noted media brokers as Elliot Evers, Bill Fanning and Andrew Bracy.
Could Evers & Co. be holding other Cumulus big-market spins close to the vest? Discussions with other brokers regarding its likely divestment of stations in Detroit have been seen. Additionally, San Francisco spinoffs had been a part of early discussions. But, it now appears Cumulus is committed to the Bay Area stations it presently has, with a new focus on struggling Alternative KFOG-FM, which has enjoyed most of its history as an Adult Alternative station.
While Richard Denning is Cumulus’ in-house counsel, Connoisseur does not have one. As such, it hired David Oxenford of Wilkinson Barker Knauer as its legal counsel in this transaction with Cumulus.