After several years of a stand-off between potential buyers and sellers, 2011 finally saw the dam break for major radio station transactions. But high-yield bond analysts Bishop Cheen and Davis Hebert at Wells Fargo Securities note that the action cooled off after excitement early in the year. So, what’s radio M&A going to look like in 2012?
“Was second half an intermission for M&A? The first half of 2011 represented the most M&A volume we have seen in radio since the leveraged buyout of Clear Channel,” the two analysts wrote in a recent research piece.
“Challenging industry fundamentals and a lack of capital had stalled radio station M&A for the better part of three years, especially for cash flow negative (stick value) stations. However, we saw three interesting transactions that affirmed radio station multiples somewhere in the low to mid-8.0x EBITDA area. First, Hubbard tested the waters, paying in the low 8.0x area ($505 million) for 17 stations in four markets, purchased from Bonneville International. Second, Cumulus completed an impressive radio rollup, using a complex set of transactions to create the second-largest radio station company in the United States, by acquiring the 75% of CMP Susquehanna it did not own and larger rival Citadel Broadcasting in a deal worth $2.4 billion. Last, we were surprised to see one stick value transaction, where Emmis Communications sold three large market stations for approximately $130 million to Merlin Media, affiliated with former Tribune CEO Randy Michaels,” Cheen and Hebert said.
“What else is on the block? The giant leveraged buyout of Clear Channel had the company looking to sell some 50-plus radio stations (placed into a trust in 2008), but that has certainly been stalled. Those stations could reappear on the block, while CBS Corp. could look to unload some of its midmarket stations in an effort to concentrate its radio assets in larger markets. In 2008, CBS announced it wanted to sell 50 of its 140 radio stations, but pulled them off the block when the credit crunch froze M&A,” the analysts said. But they didn’t really answer their question.
RBR-TVBR observation: To answer the question, to some extent, Inner City, Nassau and Peak are all in Chapter 11 proceedings, so there are some potential stations sales there. But sales outside of bankruptcy proceedings will probably surprise us all when a willing seller and a willing buyer finally bridge the gap which had kept deals from happening during the recession. We would add to their CBS Radio comment, though, that Les Moonves recently indicated no interest in putting stations back on the market.