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RADIO SECTOR RAISES VOLUME ON DEAL TALK
Sarah Mcbride – Wall Street Journal
This tune was a hit back in '99.
After a wave of consolidation in the late '90s, the radio industry went silent -- at least as far as mergers. Now investment bankers' phones are lighting up again, with stations all over the dial, from Viacom Inc.'s Infinity to closely held Susquehanna Pfaltzgraff Co., in play. The No. 1 rumor with a bullet: that Walt Disney Co. may one day sell its ABC Radio stations.
The availability of so many radio assets reflects industrywide weakness: Advertising sales growth was only 2% last year, and 1% the year before that. Some media conglomerates fear those numbers are dragging down their overall performance.
Yet most stations for sale are expected to fetch steep prices from buyers motivated by a strategy of growing in key markets. Among the potential suitors: Cox Enterprises Inc. and Cumulus Media Inc., both of Atlanta; and Citadel Broadcasting Corp., Las Vegas.
Viacom is thinking of separating its radio and broadcast television operations from its fast-growing cable businesses and movie studio. The company has slowed down on plans to sell some smaller stations but remains interested in swapping stations with other radio companies, people familiar with the matter say. The company had said more than 40 stations could be on the block. The company declined to comment yesterday on the status of its plans. At an investor conference this week, Viacom Co-President Leslie Moonves said it might not sell as many as previously planned.
At Susquehanna Pfaltzgraff, a 33-station family business in York, Pa., that began as a dinnerware company almost 200 years ago, the younger generation isn't keen to take over, leaving 80-year-old patriarch Louis Appell with few options beside selling.
Elsewhere, some deals are getting done: NextMedia Group Inc. sold eight stations in Nevada and Texas to an affiliate of private-equity firm Wicks Group of Cos. for $34 million.
The biggest inducement for potential station buyers is the chance to build their "clusters" of stations in key cities, allowing the stations to share facilities and personnel, cutting costs and creating cross-selling opportunities for advertising.
Cox, Citadel and Cumulus want to expand in cities where Federal Communications Commission regulations permit. Citadel Chief Executive Farid Suleman says the company is "always open for the right acquisitions at the right price." A Cox spokesman says the company doesn't comment on acquisition activity. In a recent earnings call, Cox Radio CEO Robert Neil said the company wanted to boost its station count in appropriate markets. Cumulus CEO Lew Dickey says the company examines all buying and swapping opportunities.
Emmis Communications Corp. would likely be interested in boosting its presence in markets such as Indianapolis, where Susquehanna will be selling some properties. Or it could add new markets where it currently has no stations and Susquehanna owns several.
Notably, Clear Channel Communications Inc., the biggest radio company, isn't considered a potential big buyer because it already is bumping up against FCC limits in many markets and is returning cash to shareholders. Still, radio head John Hogan says Clear Channel is interested in the right deals.
Emmis recently announced a share-buyback plan that could cost close to $400 million, complicating its plans for immediate buys, but its radio division president, Rick Cummings, says Emmis could arrange short-term financing for acquisitions. Mr. Cummings is interested in Susquehanna clusters including Atlanta, Dallas, Houston and San Francisco.
Susquehanna, meanwhile, is considering a management buyout of its stations as well as its cable businesses. A team of executives from Susquehanna Media, which controls the company's radio interests, is actively exploring that option, a person familiar with the matter says.
Susquehanna declined to comment.
Disney hasn't disclosed plans for selling its radio stations, but the industry buzz is that incoming Chief Executive Bob Iger may decide to do so. In a conference call with investors after Disney's latest earnings results, Mr. Iger praised the radio business, but added that the company was "always open to looking at possibilities of either buying or selling assets all with a view to improving shareholder value." Disney would have to carefully structure any sale to avoid a massive tax hit, as the company has owned many of the stations for decades.
Disney's stations are chartbusters: The company owns 27 stations in the top 25 markets, including four each in New York City, Los Angeles and Chicago, the nation's top three radio markets.
In these cities, "it's very hard to get your hands on a property," says Laraine Mancini, a radio-industry analyst at Merrill Lynch. She believes a station in those markets would sell for 17 to 20 times annual earnings before interest, taxes, depreciation and amortization, or Ebitda -- putting a price tag of several hundred million dollars on some stations.
Disney's ABC has 4,500 affiliate stations and syndicates popular shows such as talkers Paul Harvey and Sean Hannity. Its radio-news division consistently scores coups such as being the first radio group to break news of the pope's death.
Sarah Mcbride – Wall Street Journal
This tune was a hit back in '99.
After a wave of consolidation in the late '90s, the radio industry went silent -- at least as far as mergers. Now investment bankers' phones are lighting up again, with stations all over the dial, from Viacom Inc.'s Infinity to closely held Susquehanna Pfaltzgraff Co., in play. The No. 1 rumor with a bullet: that Walt Disney Co. may one day sell its ABC Radio stations.
The availability of so many radio assets reflects industrywide weakness: Advertising sales growth was only 2% last year, and 1% the year before that. Some media conglomerates fear those numbers are dragging down their overall performance.
Yet most stations for sale are expected to fetch steep prices from buyers motivated by a strategy of growing in key markets. Among the potential suitors: Cox Enterprises Inc. and Cumulus Media Inc., both of Atlanta; and Citadel Broadcasting Corp., Las Vegas.
Viacom is thinking of separating its radio and broadcast television operations from its fast-growing cable businesses and movie studio. The company has slowed down on plans to sell some smaller stations but remains interested in swapping stations with other radio companies, people familiar with the matter say. The company had said more than 40 stations could be on the block. The company declined to comment yesterday on the status of its plans. At an investor conference this week, Viacom Co-President Leslie Moonves said it might not sell as many as previously planned.
At Susquehanna Pfaltzgraff, a 33-station family business in York, Pa., that began as a dinnerware company almost 200 years ago, the younger generation isn't keen to take over, leaving 80-year-old patriarch Louis Appell with few options beside selling.
Elsewhere, some deals are getting done: NextMedia Group Inc. sold eight stations in Nevada and Texas to an affiliate of private-equity firm Wicks Group of Cos. for $34 million.
The biggest inducement for potential station buyers is the chance to build their "clusters" of stations in key cities, allowing the stations to share facilities and personnel, cutting costs and creating cross-selling opportunities for advertising.
Cox, Citadel and Cumulus want to expand in cities where Federal Communications Commission regulations permit. Citadel Chief Executive Farid Suleman says the company is "always open for the right acquisitions at the right price." A Cox spokesman says the company doesn't comment on acquisition activity. In a recent earnings call, Cox Radio CEO Robert Neil said the company wanted to boost its station count in appropriate markets. Cumulus CEO Lew Dickey says the company examines all buying and swapping opportunities.
Emmis Communications Corp. would likely be interested in boosting its presence in markets such as Indianapolis, where Susquehanna will be selling some properties. Or it could add new markets where it currently has no stations and Susquehanna owns several.
Notably, Clear Channel Communications Inc., the biggest radio company, isn't considered a potential big buyer because it already is bumping up against FCC limits in many markets and is returning cash to shareholders. Still, radio head John Hogan says Clear Channel is interested in the right deals.
Emmis recently announced a share-buyback plan that could cost close to $400 million, complicating its plans for immediate buys, but its radio division president, Rick Cummings, says Emmis could arrange short-term financing for acquisitions. Mr. Cummings is interested in Susquehanna clusters including Atlanta, Dallas, Houston and San Francisco.
Susquehanna, meanwhile, is considering a management buyout of its stations as well as its cable businesses. A team of executives from Susquehanna Media, which controls the company's radio interests, is actively exploring that option, a person familiar with the matter says.
Susquehanna declined to comment.
Disney hasn't disclosed plans for selling its radio stations, but the industry buzz is that incoming Chief Executive Bob Iger may decide to do so. In a conference call with investors after Disney's latest earnings results, Mr. Iger praised the radio business, but added that the company was "always open to looking at possibilities of either buying or selling assets all with a view to improving shareholder value." Disney would have to carefully structure any sale to avoid a massive tax hit, as the company has owned many of the stations for decades.
Disney's stations are chartbusters: The company owns 27 stations in the top 25 markets, including four each in New York City, Los Angeles and Chicago, the nation's top three radio markets.
In these cities, "it's very hard to get your hands on a property," says Laraine Mancini, a radio-industry analyst at Merrill Lynch. She believes a station in those markets would sell for 17 to 20 times annual earnings before interest, taxes, depreciation and amortization, or Ebitda -- putting a price tag of several hundred million dollars on some stations.
Disney's ABC has 4,500 affiliate stations and syndicates popular shows such as talkers Paul Harvey and Sean Hannity. Its radio-news division consistently scores coups such as being the first radio group to break news of the pope's death.
