RBR-TVBR News Analysis
Bonneville was an active participant in the station trading market during the presidency of George W. Bush, which filled most of the first decade of the 2000s. A look at deals involving stations being sold to Hubbard shines a light on the state of today’s trading market.
It is impossible for us to peg a precise price tag for these stations. For on thing, there were swaps and multi-market deals in the mix. For another, despite the fact that Radio Business Report is pushing 30 years old, our records of transactions filed with the FCC only goes back to about 2000, not far enough to capture Bonneville’s acquisition of all of the properties it is selling to Hubbard. But it captures enough data to paint a picture of what has happened to the trading market during the decade. We were also able to look at data in some of our old issues of our Source Guide and Directory.
Before we go there, we’ll mention an observation from RBR-TVBR financial reporting wizard and executive editor Jack Messmer, who noted that Bonneville’s earlier propensity for swapping properties results in a very low basis when it comes to calculating capital gains taxes. Furthermore, Bonneville figures to benefit from the deal cut between President Barack Obama and Congressional Republicans and agreed to by Congressional Democrats, which holds the line on capital gains taxes at 15% for the time being.
So Hubbard is getting stations in Chicago, Washington DC, St. Louis and Cincinnati for $505M. How does that stack up with their worth as Y2K came and went?
The first clue is the St. Louis foursome – Bonneville was party to a three way deal that brought the cluster into the fold. Emmis bought six St. Louis stations from Sinclair (remember when they used to own radio stations?) for $220M, and turned around and swapped four of them straight-up to Bonneville for KZLA-FM Los Angeles.
That deal carried an estimated value of $200M in each direction. That’s the first number to remember. We dated the deals in September 2000.
The second deal was for WNIB-FM and WNIZ-FM, basically a full-market FM and a repeater, which are now known as WDRV-FM/WWDV-FM. Bonneville paid $165M cash for the duo to Northern Illinois Broadcasting Company in a deal we dated in December 2000.
That brings us to $365M for one full market (St. Louis) and about one-third of the Chicago operation.
Bonneville made several other deals during the period, acquiring and selling smaller western market stations in some of them. It also engineered another swap with Emmis, sending Smulyan & Co. a Chicago FM for what is now Bonneville’s Phoenix cluster. But that does not pertain to the Hubbard deal.
The next piece we have a record of is a small one. Bonneville paid $4M to Bruce Houston for a Washington DC AM station licensed to Silver Spring MD. The FCC filed the deal in October 2004.
That takes the total to $369M.
Finally, Bonneville engineered a swap with Entercom, sending three San Francisco stations away in exchange for clusters in Seattle and Cincinnati. The deal was estimated to be worth $250M. These many years later, we will take another stab at estimating, attributing $100M to the two AMs and single FM in larger Seattle, and $150M for the four FMs in Cincinnati. This one hit the FCC in February 2007 – pretty much just ahead of the big implosion that we’re still trying to recover from.
That brings our total to $521M. Roughly what Hubbard is paying.
Looked at one way, it essentially makes throw-ins of the Washington cluster, including crown jewel WTOP-FM, and two competitive FMs in Chicago.
The other two Chicago FMs came in a 1997 deal with Evergreen valued at $155M, and the bulk of the Washington stations came in a massive $370M swap with Chancellor — there’s no way to pull the DC portion out of there.
The earlier Chicago deal takes us to $676M, and we’d guess that the DC stations probably push that to $800M. Would they have commanded a higher price if they came a little further back from the actual signing of Telecom 1996? It’s all speculation, but it’s clear that prices are down significantly.
But the fact that most observers seem to believe that the $505M deal signals that station valuations are starting to bounce back tells you everything you need to know about how diminished the market has been since the collapse of Wall Street in Fall 2008.