First-round bids on the 50 stations that CBS wants to sell outside the top markets were due yesterday, according to the New York Post. Speculation is that the offers will only be at single-digit multiples in the current depressed market.
Still to be seen is how low CBS will go just to get a deal done, or several deals. CBS Corporation CEO Les Moonves said during the Goldman Sachs Communacopia conference last week that the company won’t sell if it can’t get the “right pricing.” If the price is right, though, this would become the new yardstick for radio dealmaking as discussed last week by Drew Marcus, Vice Chairman of the Media & Telecom Group at Deutsche Bank Securities, during the Dickstein Shapiro opening financial session of the NAB Radio Show.
Noting that the last radio deal over $100 million had been at a multiple of 13 times EBITDA, Marcus said the lack of recent deals had left the industry without a recent benchmark. It was his view, though, that the next big deal would be at a single digit. Perhaps, he suggested, around eight times.
So, if the initial bids come in at 7-8 times and CBS is able to move the auction up to nine or even 10 times, it would be seen as a success on Wall Street. And it might make many station owners reach for their bottles of Maalox.
Will this be the deal that returns Joel Hollander to radio? He and his private equity backers might be able to be a little bit aggressive in bidding, since he knows these stations well as the former CEO of CBS Radio.
We know that Bobby Lawrence has bid on radio properties to try to launch Local Radio LLC as a companion to Local TV LLC. No doubt he’ll be in this auction as well. Entercom, Cumulus, Connoisseur and Bonneville have also received books and are expected to have submitted bids for at least some of the stations. The NY Post also mentioned Tribune Company, but that is likely just the Wall Street rumor mill not being able to distinguish between Tribune and its close operating relationship with Local TV LLC. The idea of Tribune taking on even more debt is pretty far-fetched.
RBR/TVBR observation: Should CBS sell at a single digit multiple? Don’t ask our advice, Les. We thought the sellers were foolish to let Susquehanna Radio go for the “historically low” multiple of 13 times back in the seemingly depressed marketplace of 2005. Little did we know that things were going to get a lot worse.