The real (estate) appeal of Fisher Communications


Exclusive RBR-TVBR analysis
It may seem odd that a real estate investment trust would make a bid to acquire Fisher Communications. But when you do the math it starts to make sense.

The takeover bid from Huntingdon REIT values Fisher at over $315 million – $210 million in cash and stock to buy out Fisher’s shareholders, plus about $105 in assumed debt. Don’t forget, though, that Fisher is sitting on over $40 million in cash. More about that in a minute.

The most recent 10-Q filing with the SEC by Fisher lists these asset values as of September 30, 2010:


Television  $144,416,000
Radio  $14,918,000
Fisher Plaza  $112,352,000
Other  $46,455,000
Total  $318,141,000

Note: The “other” line includes the $40 million-plus in cash, plus other cash equivalents, insurance/annuity policy values, income taxes receivable and deferred income taxes.

Consider this potential scenario: Huntingdon acquires Fisher for $210 million in cash and stock. It then sells the broadcast group for $159,334,000 and pays off all debt. That leaves it with Fisher Plaza and about $94 million in cash. That’s roughly a value of $206 million, plus the additional $6 million on the books from the “other” line, or slightly more than the $210 million.

But if the numbers in the 10-Q err on the low side, which is usually the case, Huntingdon could unlock considerably more value. For the 12 months from Q4 of 2009 through Q3 of 2010 Fisher reported that broadcast cash flow (BCF) for television was $22,317,000 and for radio $4,527,000. That’s combined BCF of $26,844,000.

At a measly multiple of eight times BCF the TV group would fetch $178.5 million and radio $36.2 million, for a total of nearly $215 million. Make that a 10-times multiple and the total price tag for the broadcasting assets is over $268 million. That’s a potential of more than $100 million to the good for Huntingdon. That trailing 12-month BCF number should also go up when Fisher reports its Q4 numbers for 2010, which was obviously a better quarter than a year earlier.

No doubt Fisher Plaza is also worth more than the $112 million-plus that Fisher lists, were it to be put on the open market. Fisher’s own businesses occupy about 40% of the prime Seattle office building.

Don’t forget, not all of the $210 million outlay is going to other parties. Huntingdon’s biggest shareholder, FrontFour Capital Group, is also a big shareholder of Fisher, with 179,021 shares at last report. So, about $4.3 million of that $210 million would really be moving from one FrontFour pocket to another.

RBR-TVBR observation: This is what hedge funds do and FrontFour is a hedge fund. Fisher has a low debt load and lots of cash on hand. Huntingdon/FrontFour is betting that it can unlock more value than Wall Street currently is giving Fisher credit for. Now the Fisher board of directors and management have to show how they can do even better for shareholders.