Clear Channel to launch

[RadioStarOne]

Clear Channel to launch a comericial free radio test in Texas! Whats this all about? The skinny anyone?

 

[Stewy]

I'd like to know also. If true then this would be the only market in america where they get the price per spot that they ask.

 

[carmine5]

I'd like to know also. If true then this would be the only market in america where they get the price per spot that they ask.

Here's a link to the NY Times article.

http://www.nytimes.com/2007/04/23/business/media/23radio.html?_r=2&oref=slogin&oref=slogin

It's either a brilliant move or a desperate one. My only question is that if the d.j. is supposed to weave the sponsor's name and product between songs throughout the hour how is that going to affect the d.j.'s spontaneity and credibility with his/her audience?

CC, apparently, is giving this experiment several months.

C5

 

[radionut925]

Here's a link to the NY Times article.

http://www.nytimes.com/2007/04/23/business/media/23radio.html?_r=2&oref=slogin&oref=slogin

It's either a brilliant move or a desperate one.

[/quote]

Sounds more like the latter move: desperate. It seems like CC is trying to save what little is left of this sinking ship. ???

 

[SirRoxalot]

Back to the Future

Wow. Somebody is resurrecting 1940s radio, when sponsors would buy a half-hour or an hour of airtime and a host would weave sponsor mentions into the patter between big-band performances. Maybe CC will bring back the sound effects guy and the girl singers who did the jingle live in the background.

 

[davideduardo]

Sounds more like the latter move: desperate. It seems like CC is trying to save what little is left of this sinking ship. ???

Sinking? To the contrary, Clear is making huge cash flows, and they have sold off much of the lower margin small market portion of the buisnes. They spun off Live Nation, and the stock they kept proceeded to double, and they got a huge premium on the TV stations they sold.

 

[SaltyDog]

Sinking? To the contrary, Clear is making huge cash flows

Really? Do tell! So this Thursday's earnings release will a great one?

and they have sold off much of the lower margin small market portion of the buisnes. They spun off Live Nation, and the stock they kept proceeded to double, and they got a huge premium on the TV stations they sold.

That is indeed good news, but the better-than-expected price for the TV stations is problematic for the buyout even at the higher offering. That's because when the lofty valuation of the TV stations is subtracted, the buyout only values the radio assets at 9 1/2 times cash flow. That gives ammunition to the opponents of the buyout. How confident are you that shareholders will approve it?

 

[davideduardo]

Really? Do tell! So this Thursday's earnings release will a great one?

Reasonably good. It is Q1 for a media company, but it should be up from Q1 of 2006. Advertising is cyclical, and Q1 was not too hot for anyone in media.

That is indeed good news, but the better-than-expected price for the TV stations is problematic for the buyout even at the higher offering. That's because when the lofty valuation of the TV stations is subtracted, the buyout only values the radio assets at 9 1/2 times cash flow. That gives ammunition to the opponents of the buyout. How confident are you that shareholders will approve it?

The TV stations have not closed, and the resultant cash belongs to the buyer. It is not a problem.

You can not put a flat valuation on CCU as half the revenue is from billboards, which, as an enterprise, do not have the same multiples as radio. The buyer is pretty much paying 5 x EBITDA for the billboard division, and 15 x EBITDA for the broadcast part, with or without the TV stations.

Shareholders may not approve the sale, because many do not realize they are getting a good deal.

 

[SaltyDog]

The TV stations have not closed, and the resultant cash belongs to the buyer. It is not a problem.

Perhaps. On the other hand, Sarah McBride, who covers radio for The Wall Street Journal, wrote on April 21, 2007:

The TV stations carried a bigger price tag than many analysts had expected, giving ammunition to shareholders who say they should vote down the privatization and let the public-company shareholders reap the benefits of asset sales.

I agree with this point-of-view. My bet is that the new owners intend to continue to sell assets because the sum of the parts is greater than the whole. Current shareholders would naturally prefer that they execute this strategy now rather than leave the profits for the new owners. Now, reasonable people can disagree on whether this will happen and it's not a slam dunk decision, but I'm skeptical that shareholders are getting a good deal.

Shareholders may not approve the sale, because many do not realize they are getting a good deal.

It seems to me that it would be helpful to other station owners if it did NOT go through. It would validate their claim that the market is undervaluing their assets. I would like to see the deal blow up purely for the entertainment value of seeing what they would do next.

 

[davideduardo]

Sinking? To the contrary, Clear is making huge cash flows

Really? Do tell! So this Thursday's earnings release will a great one?

In the aftermath, the earnings release was sensational, especially in the billboard half of the business, where revenues were up 8%. Radio, despite a weak Q1 in the industry, was up 3%.

 

[SirRoxalot]

Sensational

In the aftermath, the earnings release was sensational, especially in the billboard half of the business, where revenues were up 8%. Radio, despite a weak Q1 in the industry, was up 3%.

Gee, with Clear Channel doing so well, why would the shareholders want to give up their stake in the company? It sounds like management is moving in the right direction be creating a leaner, more profitable company.

There's $1.2-Billion in cash coming into the company once the TV sale settles. CC could buy back the shares of the people that want out and/or retire a boatload of debt, and the rest of the shareholders could be sitting pretty. The buyout deal sounds even less attractive, doesn't it?

 

[davideduardo]

Re: Sensational

In the aftermath, the earnings release was sensational, especially in the billboard half of the business, where revenues were up 8%. Radio, despite a weak Q1 in the industry, was up 3%.

Gee, with Clear Channel doing so well, why would the shareholders want to give up their stake in the company? It sounds like management is moving in the right direction be creating a leaner, more profitable company.

There's $1.2-Billion in cash coming into the company once the TV sale settles. CC could buy back the shares of the people that want out and/or retire a boatload of debt, and the rest of the shareholders could be sitting pretty. The buyout deal sounds even less attractive, doesn't it?

Supposedly, the bankers are paying a premium of over 25% above the share price prior to the first round of the offers. Like Univision going private, the shareholders liked the premium and a majority voted to tender their shares at the higher price.

When the new vote comes, shareholders will decide if the offer is better than the prospects for an ongoing public corporation.

By the way, CCU is not "creating a leaner more profitable company." They are moving away from areas where they are not dominant, such as TV, and getting rid of markets that have lower margins. The properties being spunt are not, as a group, unprofitable. In fact, the market does not like companies that do not grow... and cutting back may have distinct disadvantages.

 

[SirRoxalot]

Understanding

By the way, CCU is not "creating a leaner more profitable company." They are moving away from areas where they are not dominant, such as TV, and getting rid of markets that have lower margins. The properties being spunt are not, as a group, unprofitable. In fact, the market does not like companies that do not grow... and cutting back may have distinct disadvantages.

Let me try to understand this. CC isn't "creating a leaner, more profitable company", but "they are moving away from areas where they are not dominant, such as TV, and getting rid of markets that have lower margins".

Let's say that I have a company, and some of the divisions are making a 10% profit on my investment, while other divisions are making a 3% profit on my investment. Either I'm more successful at managing the companies that make a 10% profit, or they offer a product that is in greater demand and has less competition. If I sell the divisions that make the 3% profit and reinvest the money in the divisions that make a 10% profit, don't I end up with a "leaner, more profitable company"?

Aren't stockholders rewarding companies who have expanded beyond their capabilities in the past, and are now refocusing on their core businesses? I seem to have heard positive comments about such divestment of unprofitable divisions in other industries from analysts and financial pundits over the last few years.

I think that it's demonstrable that CC's foray into small-market radio in an attempt to create "regional synergy" has been less than successful for either CC or the local markets. TV was also more of an afterthought than a core business for CC. Getting out of both areas allows them to concentrate on what they do best, reduces their (considerable) debt load, and frees up money for intelligent expansion of their profitable sectors. Why wouldn't shareholders want a piece of a company that has the potential for intelligent growth, as opposed to their past acquisition practices?

I noticed that the Mays family isn't giving up their stake in the company. Shouldn't that tell current stockholders something?

 

[davideduardo]

Re: Understanding

Let me try to understand this. CC isn't "creating a leaner, more profitable company", but "they are moving away from areas where they are not dominant, such as TV, and getting rid of markets that have lower margins".

Nope. The small radio markets were such a minor part of the company (when batches of 100 stations go for less than on New York FM) they had no material effect except as a distraction for management... it is well known that small markets, dollar for dollar, require far more supervision than big market stations.

The TV properties had comparable margins to large market radio, which is why they got a good price.

But if you look at it, Clear is getting out of non-core business. It has even been suggested that the billboard division be spun... the Live Nation spin was very successful (stock price more than doubled).

I think that it's demonstrable that CC's foray into small-market radio in an attempt to create "regional synergy" has been less than successful for either CC or the local markets.

This was a Jacor and Randy Michaels project... I don't think CCU ever pushed it the way Randy planned. In any case, under Clear it did not increase the value of what are mostly very small radio stations.

TV was also more of an afterthought than a core business for CC.

So was the entertainment division, and so is outdoor. The idea of an entertainment and media conglomerate was, simply, not as synergistic as they envisioned.

Getting out of both areas allows them to concentrate on what they do best, reduces their (considerable) debt load,

The debt to equity ratio of CCU is lower than that of GE. It really is not high, and can be supported easily by existing cash flows.

and frees up money for intelligent expansion of their profitable sectors. Why wouldn't shareholders want a piece of a company that has the potential for intelligent growth, as opposed to their past acquisition practices?

There is not much left for them to purchase, and they are in a sector with flat to low revenue growth. Most shareholders would like to make a little money and get out. The issue is how much "a little" is today.

I noticed that the Mays family isn't giving up their stake in the company. Shouldn't that tell current stockholders something?

Yeah, it says they don't want to pay capital gains taxes. ;D