The Dealmaker's Predictions: A Robust 2017 For TV Deals

Can we just end 2016 today?

That's a refrain many media brokers may be saying. 

"This was mostly portfolio tweaking," says George Reed, a media broker with Media Services Group based out of the Jacksonville, Fla., office. "Inventory is, and has been, limited."

But the next 12 months look good, says Reed and another broker who shared their thoughts on 2017 with RBR + TVBR. 

Read the full article here (login required). 

Guest Blogger Stephan Sloan: Contest Rules

Few tournaments have rules for those no longer competing. The Incentive Auction does in the form of 47 C.F.R. § 1.2205(c), the Prohibited Communications Rule. For more than 800 stations not needed in Stage 1 the price of entering the tournament is the continuing burden of the Prohibited Communications Rule. Station owners interested in exploring the sale of their station are presently challenged to provide information to prospective buyers concerned that they will be thought to be communicating elements of their bidding strategy or outcome inthe auction. Buyers are dubious of the effort or resources they should expend to pursue a station which could be frozen in the auction. 

I have been pleased to support efforts to identify stations that should be waived from this rule as they no longer represent meaningful data for rational models of auction outcomes in the current and later Stages. I remain hopeful that recognition of the public good for the purposes of community service and repack as well as the negligible value to the remaining competitors will guide the FCC to a relaxation or limitation of the Prohibited Communications Rule. 

For those wishing to pursue the purchase of a station that elected to participate in the Incentive Auction I can offer data on the probability of a station being frozen. Good modeling provides buyers a rational understanding of the probability a station was frozen in the Incentive Auction and on that basis, decide if they should pursue it or not. Buyers can make their own assessment without input from the station owner, honoring the Prohibited Communications Rule.

We are clearly past halftime in the Incentive Auction tournament. Like in the final quarter of a game, I think the highest stakes calls are being made now in Stage 4. Notre Dame football coach Lou Holtz encouraged his players; “How you respond to the challenge in the second half will determine what you become after the game.” I hope I can assist some of you or your clients with successful answers to these challenges.

Stephan Sloan

Director, Media Services Group

401.454.3130

ss@mediaservicesgroup.com

Guest Blogger Stephan Sloan: Tournament Television

The Incentive Auction is looking more like a tournament than an auction to me.

In the early stages of the Incentive Auction the perception of winning this tournament, that is receiving more value for your television license than it was otherwise worth, was probable for many stations. Licensees who were allowed to participate piled in to the contest and expected a victory. This behavior can be seen as the success of the opening bid prices and the distribution accomplished by the FCC and the Greenhill Report.

Like in tournaments, participants’ assessment of victory evolves as time elapses. The huge spread between the Stage 1 Clearing Target and Net Auction Proceeds was a strong indication to competitors that multiple stage progressions would be likely to close that gap. Many models pointed towards Stage 4 as the first opportunity for validation.

For a participant, anticipation of a Stage 4 result yields a radically different expectation of winning both in terms of probability and magnitude. It can be modeled that 270+ fewer stations are frozen by Stage 4 and the amounts paid to the winning licensees is reduced by more than 70%. The tournament by Stage 4 is a different contest. Without confidence, the Incentive Auction of Stage 4 does not create hope for winning but raises the question what does loosing look like?

I believe that as the stages have progressed many television station owners have turned away from further assessment of their reserve price (a metric for winning) and have focused instead on post Incentive Auction plans. To illustrate this point, Stage 1 results promised each of two or more duopoly owners in a market a winning scenario of each of them freezing one station in the auction and receiving a generous sum of money, participation in the tournament is rational. After the auction, each of the duopoly owners could be winners and the competitive landscape in the market would remain as each duopoly would likely now be represented by a single station (and a large bag of cash).

Stage 4 likely presents asymmetric results where all of the stations offered by the duopoly operators would not be needed. Outcomes include some duopolies remaining intact while another may freeze a station. Is a definition of winning being the only duopoly to freeze and facing post Incentive Auction competition with half the bandwidth of the competition (and a smaller bag of cash)? Pricing this scenario is complicated as well where reserve prices become relative to the competition rather than a function of enterprise value.

How do you like the tournament so far?

Stephan Sloan
Director, Media Services Group
401.454.3130
ss@mediaservicesgroup.com

Alpha Media Sells Two Virginia Radio Stations to Educational Media Foundation (Press Release)

Educational Media Foundation (EMF) has entered into an agreement to acquire WLFV-FM in Midlothian, VA and WARV-FM in Petersburg, VA, serving Richmond, VA from Alpha Media.

The purchase price is $2,000,000.*

George Reed of Media Services Group represented the Seller in this transaction.

'Let's Make A Deal in 2017,' Radio Ink Special Broker Report

They work the phones and their contacts every day, looking for deals, proposing transactions, hooking sellers up with buyers. Brokers who deal in radio have all the inside information on who has the capital, who wants to sell, and what the real multiples are.

According to SNL Kagan, through he first three quarters of 2016, the radio deal volume was about $418 million, with the Beasley purchase of Greater Media deal being the largest ($159 million) - and that's low. Read the full article here.

Crown Castle to Buy FiberNet for $1.5B Adding 11,500 Miles of Fiber to Portfolio

Crown Castle (NYSE:CCI) announced today that it has entered into a definitive agreement to acquire FPL FiberNet Holdings, LLC and certain other subsidiaries of NextEra Energy, Inc. (NYSE:NEE) (collectively, “FiberNet”) for approximately $1.5 billion in cash (subject to certain limited adjustments). FiberNet is a fiber services provider that owns or has rights to approximately 11,500 route miles of fiber installed and under construction in Florida and Texas, inclusive of approximately 6,000 route miles of fiber in top metro markets.  Pro forma for the proposed acquisition, Crown Castle will own or have rights to approximately 28,500 route miles of fiber.

“The addition of FiberNet’s complementary footprint in top metro markets in South Florida and Texas bolsters our fiber available for small cells in markets where we see significant demand from our wireless carrier customers,” said Jay Brown, Crown Castle’s Chief Executive Officer. “As demand for wireless connectivity continues to grow, small cells are playing an increasingly important role in adding the network capacity and density needed to provide ubiquitous high-speed, high-capacity wireless services.  With a long runway of expected growth ahead for small cells, we believe our investment in FiberNet further strengthens our leading position in small cells and will enhance our long-term dividend growth.”

Crown Castle expects the acquisition to close in the first half of 2017 and to be immediately accretive to Adjusted Funds from Operations (“AFFO”) per share upon closing.  In the first year of Crown Castle’s ownership, the transaction is expected to contribute approximately $105 to $110 million to gross margin and approximately $15 to $20 million of general and administrative expenses.  Additionally, the transaction includes approximately $5 million in annual cash flows associated with a customer lease that will be accounted for as a financing lease and therefore not contribute to the expected gross margin.  Supplemental materials related to the transaction have been posted on the Crown Castle website at http://investor.crowncastle.com.

Salina Radio Stations Acquired by Rocking M Media, LLC. (Press Release)

Salina, KS: (Wednesday, October 12, 2016) Alpha Media LLC and Rocking M Media, LLC announced today their formal filing with the Federal Communications Commission to transfer five of Alpha Media’s radio stations in Salina, Abilene and Manhattan Kansas to Rocking M Media.
The radio stations to be transferred are; KSAL-AM 1150; KSAL-FM 104.9; KABI-AM 1560; KYEZ-FM 93.7 and KBLS-FM 102.5.

Alpha Media CEO/President, Bob Proffitt commented on the announcement, “We’re happy for our employees in Salina to be joining such a great company. Rocking M Media is a strong force in Kansas radio and media.”

Rocking M Media President, Christopher Miller added, “RMM is so very excited to add the Alpha Media staff and stations to our family. They will be a great addition and will be instrumental in helping RMM promote the businesses and communities in and around our Salina and Abilene markets.”

Alpha Media was represented by George Reed of Media Services Group and Rocking M Media was represented by Gammon Miller media investment bankers.

About Alpha Media
Alpha Media, headquartered in Portland, Oregon was formed by veteran radio executive, Larry Wilson in August 2009 and initially acquired six Portland radio stations. After several acquisitions and this transaction, Alpha Media will own or operate 246 radio stations within 50 markets across the United States covering all formats including Top 40, Adult Contemporary, Spanish, Urban, News Talk, Sports, Rock, Country and more. In addition to the radio stations, Alpha Media owns the intimate performance venues, Skype Live Studio in Portland Oregon and Alamo Lounge in San Antonio, Texas. 

About Rocking M Media
In 2007 the Miller family established what has become known as Rocking M Media, LLC (RMM) as a business development company. The RMM group of 24 radio stations covers all of Central and Western Kansas and parts of Nebraska, Colorado, Oklahoma, Texas and Wyoming.
The principals of RMM are Monte and Doris Miller and their sons Christopher Miller and Quinn Miller and Christopher’s son Cale Miller. The Miller family has been developing businesses in Kansas for more than 100 years. They have owned newspapers, television stations and now radio stations. Monte Miller’s grandfather was A.Q. Miller, from Salina Kansas and he started the family media business with owning newspapers in Kansas and Colorado in the 1890’s. The Journalism School at Kansas State University is named The A.Q. Miller Family School of Journalism and Mass Communications.

As a business development company RMM focuses on the needs of entrepreneurs and business owners in its radio markets; by offering incubator office space with business training, radio advertising, digital media, social media and raising capital with its crowd funding site RuralGrowth.com.

RMM is as entrepreneurial as its clients and has launched other businesses that complement the RMM platform like; TodayInKansas.com a news portal that has its own radio network that broadcasts three Kansas news reports daily on 27 radio stations in Kansas, the Kansas Farm and Ranch Radio network the largest Ag radio network in the state, Wheat State Signs a sign company in Pratt, KS, KANBids.com an online auction site with auctions every two weeks where RMM sells local services and merchandise from its radio station advertisers. 

RBR Article On My M&A Predictions

By Leslie Stimson | RBR 

Asset sales for radio were slow in the first half of the year. Up until Beasley Broadcast Group's announced $240 million acquisition of Greater Media in July, the biggest transaction in radio this year was KSBJ Educational Foundation's $10 million deal to buy KUHA-FM from Houston Public media. 

RBR+TVBR asked Media Services Group Managing Partner George Reed for his thoughts on how the rest of the year will play out for radio M&A. Read the full article here. 

WVJT, LLC To Purchase WVMP-FM From Community Media Group, LLC (Press Release)

WVJT, LLC has entered into an agreement* to purchase WVMP (FM) in Roanoke, VA, from Community Media Group, LLC. The buyer is headed by Todd Robinson, who owns radio stations in Lynchburg, Bedford, Covington, Clifton Forge and Lewisburg West Virginia. The seller is headed by Dr. William E. Amos, who holds no other broadcast interests, but will become a shareholder of Community Media Group upon the closing of the transaction. WVMP will continue to be located at the Patrick Henry Hotel. 

WVJT, LLC began operating WVMP on August 1, 2016, under a local marketing agreement. According to Todd Robinson, "Our group is excited to become a part of such a wonderful community (Roanoke area) and look forward to continuing and expanding the fine broadcast services started by Dr. Amos and his very capable staff." 

According to Dr. Amos, "My workload as CTO of Meridium and other software ventures has increased. This month we will release a new version of our software and I need to spend more time working with Meridium customers and project teams making the transition to the new product line. I'm excited to be a shareholder of Todd's company and will assist as required. Being a shareholder of the group was important to me continue to promote the local market." He went on to say, "I'm quite proud of the gains the station has made over the past eight months in terms of revenue and improved signal. It's good to leave the station on an up note. The entire staff has done a remarkable job and I can't wait to see the impact of WVMP being affiliated with a group that provides complete market coverage." 

The purchase price is $600,000. 

George Reed of Media Services Group represented the Seller in this transaction. 

*Pending FCC Approval 

InSite Wireless Group Announces Macquarie's $280M Investment (from Inside Towers)

InSite Wireless Group today announced that Macquarie Infrastructure Partners, as part of an initial investment of approximately $280 million—has acquired a 42.5% equity interest in the company from Catalyst Investors II, L.P. and other minority investors.

David Weisman, InSite’s President and CEO describes the new partnership as “groundbreaking...and represents a significant growth opportunity for us. We’re delighted to partner with an experienced investor that has such a keen understanding of the wireless telecommunications infrastructure space,” he said. 

Macquarie has also committed to additional future investments to promote InSite’s continued growth. InSite owns, operates, and manages wireless telecommunications tower site facilities and distributed antenna systems (DAS) across the United States, Puerto Rico, U.S. Virgin Islands, Canada, and Australia.

InSite will continue to be led by its existing management team of co-founders David  Weisman and Lance C. Cawley, CFO. Cox Enterprises—and several of its subsidiaries—and Catalyst Investors IV, L.P. will continue to be investors in InSite.

“We are very pleased to become a major investor in InSite,” said Karl Kuchel, Chief Executive Officer of Macquarie Infrastructure Partners Inc. “The company has an experienced management team that has delivered strong growth over many years. We look forward to partnering with this team, Cox, and Catalyst to support InSite’s future growth.”

“We believe that wireless infrastructure represents an attractive area for long-term investment,” said Pat Esser, President of Cox Communications. “We are excited to welcome MIP III as an investor and believe that InSite has emerged from this transaction as a truly unique provider in the industry, well-positioned for long-term strategic growth.”

“It has been a privilege to be a part of InSite’s tremendous growth and success over the last six years. David and his team delivered an exceptional return on our initial investment. We are thrilled to continue as an investor and as a partner with Macquarie Infrastructure Partners and Cox,” said Todd Clapp, Partner with Catalyst Investors.

The purchase agreement was signed by the parties on July 1, 2016. The transaction was subject to customary regulatory approvals and closing conditions, and was closed effective July 29, 2016. Evercore served as financial advisor to InSite and Lowenstein Sandler LLP and Sullivan and Worcester LLP provided legal counsel. Guggenheim Securities served as financial advisor to MIP III and White & Case LLP provided legal counsel.

George
Media Services Group

Unlock the Value in Your Broadcast Towers

Many of our broadcaster clients have chosen to monetize their tower assets at impressive prices.  This year alone, I have sold and closed over 200 broadcast towers to tower consolidators.  While radio stations continue to trade at 6.0x to 7.0x cash flow multiples, towers are trading and 10.0x to 12.0x, and well into the “teens” if they include 3^rd-party cellular tenants.


If you would like to confidentially discuss the value and marketability of your broadcast towers, please give me a call.


George
Media Services Group
904.285.3239

Beasley Broadcast Group + Greater Media

Thoughts on the $240 million deal. Read them here. 

NJ Broadcasting, LLC Closes on WWRL-AM In New York City (Press Release)

NJ Broadcasting, LLC, owned by Dr. Nimisha Shukla, closed on the purchase of WWRL-AM, New York City, from Access.1 Communications Corp. Access.1 is headed by Chesley Maddox-Dorsey. The station has been operated by NJ Broadcasting under an LMA since February 1. The purchase price was $7,000,000. 

WWRL-AM, 1600 kHz, programs for the large South Asian Community located throughout the Tri-State Area. Dr. Shukla, a Pediatric Physician, also owns 7 Days Pediatrics, located in Edison, New Jersey.

Tom McKinley and George Reed of Media Services Group represented the seller in this transaction.

Tweet of the Week

Have a great 4th!

George

Guest Blogger Stephan Sloan: Bigger Than Big

$86,422,558,704

That looks like $2.71/MHz/Pop.

I didn't have the optimism to model that there would be reserve price discipline of the middle and smaller TV station owners to support this. The message I see in this information is that the TV broadcasters have participated fully in the FCC's plan and the spectrum is valuable to them. I also see an effect from the consolidation in the Television business as the larger broadcasters had the time and talent to determine optimal yield analysis and bidding strategies. While I remain surprised by the total I believe there is substantial data to support validation from the Forward Auction.

Before recoiling at that clearing cost please consider the quote below from Peter Compton in commenting on the results of the AWS3 Auction back in May of 2015.

"The nationwide average price for the paired blocks was $2.72/MHzPop, about three times higher than investment banking estimates before the auction began."

Stephan Sloan 
Director, Media Service Group
401.454.3130
ss@mediaservicesgroup.com

Guest Blogger Stephan Sloan: The Big Big Number

I tipped my hand with my LinkedIn post on June 1st "The $40 Billion Blink" as to what sort of capital I thought would be required to clear 126 MHz in the Reverse Auction.

George Box famously observed that all models are wrong but some are useful. In this spirit I accept that my models are wrong but none the less support and illustrate reality. Though many of the industry professionals I respect have opined at much lower Reverse Auction clearing costs, I expect $58 Billion or greater. The histogram below presents the data from 99 iterations modeling the Reverse Auction.

What this data means is that I can construct models that indicate a high probability that the clearing cost is more than $58 Billion and costs exceeding $60 Billion are a significant possibility. This represents a range of approximately $1.72 to $1.93 /MHz/Pop. If you accept the idea that the first round of the auction evidenced stations freezing based upon the requirement to meet the maximum possible clearing target, then we were bound from the moment the clearing target was announced, to end up here.

$58 Billion also has an additional significance to those of you following my LinkedIn postings. I’ve enjoyed very much the opportunity to post these thoughts and your responses. For my contacts who would like to take me up on it, I will wager a steak dinner– at the restaurant of your choosing- that the clearing cost will exceed $58 Billion. $57,999,999,999.99 or lower and it’s on me, just memorialize your interest in an email, tweet, LinkedIn Message or other dated communication before the FCC releases the data. I think a good reference should be the Incentive Auction dashboard.

I’ve been focused on this level of clearing cost since 126 MHZ was announced on April 29th. I look forward to discussing how this value is validated in the Forward Auction.

Stephan Sloan
Director, Media Services Group
401.454.3130
ss@mediaservicesgroup.com