Materials filed with the SEC indicate that talks leading up to the announcement a little over a month ago that Westwood One and Dial-Global would merge dated back to December of 2009. And it was Westwood One which made the first approach.
With The Gores Group recapitalizing Westwood One in 2008 the private equity company began looking at potential acquisitions to boost WW1’s position in the radio network business. Its financial advisor, Moelis & Co., soon identified the Dial-Global business owned by Verge Media as a “logical strategic acquisition.” Verge is primarily owned by Oaktree Capital Management.
The preliminary discussions begun at the end of 2009 didn’t immediately lead to a deal, but the parties kept talking.
Meanwhile, WW1 had talks with other parties about potential transactions, including two referred to in the SEC filing as “Party A” and “Party B,” both described as being “in the broadcasting and radio station operator sector” and having “substantially greater financial resources” than WW1.
Discussions with Verge heated up again in September 2010 as WW1 and Moelis discussed how WW1 could obtain financing to buy Dial-Global. But the talks were terminated in mid-December 2010 because financing could not be found on favorable terms.
Thereafter, the potential terms of the transaction began to change – moving from a purchase by WW1 to a merger. But first, negotiators for both Verge and WW1 wanted WW1 to divest its Metro Traffic business so a merged company could focus on the synergies the two shared in the network radio business. That was accomplished in April, with Clear Channel as the buyer.
But at about the same time the unidentified Party A got serious about trying to buy WW1 and requested a meeting to discuss a potential transaction.
So for a while there were two sets of talks going on at WW1: about a potential merger with Verge; and about a potential sale to Party A.
On June 2nd Party A offered to buy Westwood One for approximately $87 million, consisting of $44 million in cash and $43 million in the stock of Party A, based on the closing price of Party A’s stock. (So we know that Party A was a publicly traded company.) WW1, however, had Moelis inform Party A that the offer was too low.
Indeed, the deal eventually cut with Verge valued WW1 at about double that rejected offer.
Party B, also unidentified, was asked if it wanted to make a bid for WW1, but it declined. And a “Party C” also jumped into the mix in July, although those discussions didn’t go anywhere.
But Party A still wasn’t finished. It came back July 20th with a revised offer of $125 million, consisting of $100 million cash and a two-year note for the remaining $25 million. But that was still below the value of the potential merger deal, so Moelis again told Party A it needed to up the ante.
Party A raised its bid on July 26th to $125 million, all cash, plus $20 million in stock, for a total of $145 million. After again being told that its bid was too low, Party A dropped out of the bidding.
The merger agreement between WW1 and Verge was signed on July 30th and they jointly announced on August 1st that Verge would merge Dial-Global into publicly traded Westwood One, with Verge’s shareholders owning approximately 59% of the merged company.
RBR-TVBR observation: What’s important for radio, not just Westwood One or Dial-Global, is that there were multiple bidders for WW1. The radio network business must still be a pretty good business if people are willing to step up to the table with more than $100 million in cash.