What the Cumulus-Crestview deal really might mean


The potential significance of the Cumulus-Crestview Partners’ recent  announcement that they are going to spend up to a billion dollars to buy stations is compelling. Obviously this is timed to precede the NAB Convention. Lew Dickey, who was basically nurturing a publicly-traded company that was down on its luck (like all broadcast radio stations a year ago) is probably going to be the proudest man walking the floors of the convention.

The brokers and other elements of the financial community have got to be rejoicing – because psychologically, this could be the first “crack in the thaw” of station trading and renewed interest from Wall Street in the broadcast radio industry.

It’s sort of like J.P. Morgan himself walking into the NYSE back on Monday, following Black Thursday in 1929 in the great stock market crash, and announcing to a very scared market that his company was going to buy. His company essentially bought just about every security that was out there (not in quantity). And that move broke the negative mentality that was so thick you could cut it with a knife. The stock market actually rallied after that for another two or so years. It wasn’t really until 1932 that the market went down and the Great Depression actually kicked in.

“Broadcasters and the perception of broadcast station asset values have been so darn beat up that this could be something analogous to that,” said Dave Schutz, President of Hoffman Schutz Media Capital. “Brokers are going to be ecstatic. This could be a catalyst – the true first note of optimism for radio asset values and interest from the financial community in this sector in two years.”

George R. Reed, Managing Director, Media Services Group, agrees: “The equity investment into Lew Dickey represents a sea-change event. It is not simply the fact that Lew will invest new money into the business, it is the reality of being the first good industry news in 17 months. Overnight, the negative perception changed. These guys represent “smart money.” Follow the smart money. I believe that Lew is as likely to buy distressed paper as he is to buy stations. If so, 1) he’ll make a lot of money, and 2) banks with large, troubled broadcast portfolios will breathe a little easier.”

He adds, humorously, “Regarding the NAB, Lew will clearly be ‘the most popular girl at the dance’.”

Frank Boyle, President of Frank Boyle and Company, had this to say: “LUCKY SPERM CLUB IS ALIVE AND WELL…Lew Dickey, Jr and Tom Murphy, Jr inherited great genes — as did David Field, Al Liggins, Randall & Mark Mays — not to forget Rick Buckley and Pepe Sutton..
Conceptually, the Lew Dickey & Crestview reported plan to play Acquisition poker with a Billion Dollars is truly exciting news. However, Lew has already found out with his predictable early probes — that’s there are already a few other LSC members with equally fat wallets pawing over similar ground. They’ve not been successful because Sellers have been reluctant to cave to their terms demands–like 4 to 5X Sales Multiples..
Lew is a very bright guy and persuasive salesman. He’s now facing himself in the mirror–reflecting what the other ‘Jumbo’ buyers have offered Lew for some of his toys. Now it’s his turn.
Lew’s timing could be exquisite to help him succeed where other peers haven’t. Radio revenues have shown surprisingly significant local & National growth in 2010 YTD vs. ’09 & ’08. The US Economy seems to have turned the corner. Bankers and Lenders who’ve negotiated Equity for Debt may well be having second thoughts about enjoying 90% O ‘n O status.
Many veteran broadcasters, like Joel Hartstone, have said to me recently in my travels — that the Industry which tends to operate like sheep needs a Shepherd to make an eye popping buy — to open the flood gates. We all know there’s literally a ton of big money sitting latent on the sidelines–waiting for the “GO” signal.  Lew could be the St. Peter to open those pearly gates with a Big Casino buy that other Buyers & Sellers would love to use as their Role Model.
You could build a case that it’s time for all Public Radio Companies to fire their Wall St. Bosses and go private. Seems like yesterday that John Kluge and Don Pels used to flip from Public to Private and never miss a growth step along the way. Lew & Crestview are about to find out that the key word to acquisition success is ‘compromise.’ If not, to misquote Wm. Shakespeare — “It’ll all be sound & fury, and signify nothing.”

Observes Frank Kalil, President, Kalil & Co.: “Not one to follow the lemmings rushing to the sea, Lew Dickey has always sought a higher vantage point  from which to watch. As an operator, he knows that broadcast properties are not static investments.  They need to be worked and that’s what he does. 
He also knows a deal when he sees one and they are now all around him.  With this war chest from Crestview, he is, once again, King of the Hill.  
When you hear Lew speak, often at Lew Paper’s seminars, one can understand and know that the business is fundamentally sound and he knows it.  True, a lot of people know it, but they don’t have access to funds for acquisitions.  Lew does. 
One caveat:  Lest anyone think this automatically raises multiples, please remember that Lew can always say ‘No’ when presented an opportunity. Our sincere hope is that he buys out the naysayers as the sky isn’t falling.  Lew is the poster child for economic Darwinism.” 
RBR-TVBR observation: So, indeed, this is going to be a very interesting thing to watch as the next radio investment boon might be nearing. We bet Lew Dickey will be glowing…pity that many of the broadcast bankers are at the Bellagio, and the owners & brokers are two miles away at Wynn’s Encore. Also, we wonder from the Crestview $1 billion if $500 Million is tied to a specific multiple like 5X; then $100M at 8X; $50M at 10X or more, etc. Senior Debt now is in the 3.5X range.