Future of Wilks Broadcasting?

[tall_guy1]

Wilks these past few years have sold all but 6 stations (they sold KC, Denver, Lubbock, and more). They also have not acquired any new stations. What are your thoughts?

 

[TheBigA]

It's an interesting question. They are a small private company that expanded through the purchase of CBS stations in Kansas City and Denver in 2008. Recently, they've sold off some of those stations. They discovered what several other companies realized, that owning stations that were formerly owned by a much bigger public media company is a lot harder than it appears.

So the question is: Can a small private company stay in business owning high quality mid sized radio stations? It's starting to look like the answer is no. The cash flow from radio, which is sizable, isn't enough to cover all the costs. They certainly can't acquire any more stations without an infusion of capital from some place. And as we know from watching the stock market, investors aren't exactly rushing in with money for radio stations right now. There is a huge glut of stations, and not a whole lot of buyers, even with the multiples down to 6. That's not a good sign for anyone holding on to a bunch of radio stations.

 

[Kent]

Truth is, Wilks has always been an investment firm more than an operator in it for the long haul. Its M.O. has always been to buy stations, slash their operational costs to next-to-nothing, and sell them a year or two later for a huge multiple. I doubt it would've held onto the ex-CBS stations in KC, Denver and Columbus (as well as its other stations) if it hadn't bought most of them at too high of a price a year or two before the Great Recession. It paid $136 million for KC and Columbus, and, even with the market rebound, it only got $120 million back on them. Of course, those clusters made it enough money that the hit on the sale prices didn't matter much, and the capital loss can help offset the capital gain it will get from buying Denver for $19 million and selling for north of $50 million.

 

[Kent]

Wilks these past few years have sold all but 6 stations (they sold KC, Denver, Lubbock, and more). They also have not acquired any new stations. What are your thoughts?

To answer your question, there is no future for Wilks Broadcasting, at least this incarnation. It only has three stations in Reno left, and it's trying its hardest to get rid of them. Wilks has, however, had a history of buying stations, selling the group it assembles, waiting, and coming back into the market to repeat the cycle. So, there's still the possibility that Wilks will come back a few years down the road.

A friend of a friend worked for some stations that were acquired by Wilks about 15 years ago. He said its typical spiel is for management to come into a new market, talk about how much the company loves and believes in radio. He indicated the pep talk is a good one, and that people walk away feeling like they're going to be working for a bunch of radio geeks. Then, as soon as the company gets the keys, the same management says, "We lied. We're an investment firm. We don't care about you or your properties. You're just here to make us money, and we'll be gone before the damage is done!" I had been told this incarnation of Wilks was a little better, though it definitely went into Kansas City and Columbus with a slash and burn mentality. It made massive cuts the day it came in, which also happened to be the day of the company Christmas party. Everyone who was slashed was fired in the hours before the party. I had heard management in both markets asked if they cuts could be delayed even until the following business day only to be told the people had to be cut immediately.