Tuesday, March 31, 2009

Cox Radio tender a hint of private market values


Cox Enterprises recently proposed to buy all of the outstanding shares (which they don't already own) in Cox Radio (CXR). The tender offer represented a 15% premium over the prior day's closing price. However, it also represented an opportunity for the prominent Atlanta family to take the company private at a historically low trading multiple. Estimates of the EBITDA trading multiple are in the low-5s. Remember that Emmis (EMMS) failed to go private at 10.9x just a few years ago. Multiples on other broadcast stocks are in the 4x range if you consider the fair market value of their deeply discounted debt.

So what does this say about private market multiples? One easy conclusion is that we're at the lowest multiples seen in decades. Private market multiples tend to be higher than public multiples, and I suggest that is the case today. Sellers are justifiably reluctant to sell into the current marketplace. But for those who have to, the Cox tender suggests that pricing will be on the lower end of my predicted 5x to 8x range in 2009.

George