Guest Blogger Stephan Sloan: The $40 Billion Blink

Tuesday quietly marked a most remarkable day in television station trading history. From models developed with my own assumptions, I believe the initial moment of the FCC Reverse Auction saw approximately 115 stations frozen at a valuation in excess of $40 Billion. 

For reference, if one sums all of the television stations sold from 2003 through 2014, inclusive of merger activity, it approximates the value of that one first moment of the auction. I appreciate that this estimate of the first round of the auction exceeds the total value of the Reverse Auction published by many respected entities; however, I have confidence in this estimate as I believe it to be the natural result of the function of the auction algorithm and the legislation causing the entire Reverse and Forward Auction spectacle.

With the requirement of the FCC to attempt the clearance of the maximum bandwidth for which there is participation by broadcasters, we were nearly certain to set the auction algorithm to solve a scenario where there was scarcity of participation among the most valuable stations in the nation. In this initial moment of the auction that scarcity required the freezing of stations at their opening bid with a swath of the northeast consuming $10+ Billion and the mid-Atlantic as well as Southern California taking $8 Billion each.

In terms of the Reverse Auction model, as I see it, we have accomplished the “head” of this freezing activity and will next set about the much more time consuming business of defining the long tail.

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

Big News in the TV World

FCC sets 126 MHz Spectrum Auction Clearing Target. Signals strong station interest in big auction payday.

Read the story HERE.

George
Media Services Group

Media Services Group Tops the Rankings Again (Press Release)

Media Services Group maintains the top spot in the broadcast brokerage rankings for 2015.*

• #1, Top radio broker
• #1, Top broadcast broker by number of radio stations sold
• #1, Top broadcast broker by number of total deals
• #1 and #6, Top brokered deals (excluding deals exclusively brokered by investment banks)

About Media Services Group: 

Media Services Group was founded in 1990 and has grown into one of the most successful media brokerage firms in the past decade. The firm offers brokerage, asset management, valuation and investment banking services to the broadcast and new media industries from offices throughout the U.S. For more information, please visit www.mediaservicesgroup.com

*Source: SNL Kagan Broadcast Investor: Deals & Finance (Edition: February 29, 2016)

Vertical Bridge Closes on Alpha Media Radio Broadcast Towers (Press Release)

Vertical Bridge, the largest private owner and manager of wireless communication infrastructure in the U.S., today announced that it has completed the acquisition of nearly 200 radio broadcast towers in a two part transaction with Alpha Media. The portfolio of assets acquired includes 64 sites from Alpha Media’s existing portfolio and 49 sites which Alpha Media recently acquired as part of its purchase of radio stations from Digity, LLC. Financial terms of the transaction were not disclosed.

With this acquisition, Vertical Bridge now has a total portfolio of over 42,000 towers, rooftop locations, billboards, utility infrastructure and other site locations that it owns, operates or manages. The company’s geographic presence in key markets across the U.S. has also expanded significantly.

“We are thrilled to partner with Larry Wilson and Alpha Media, which owns and operates an admirable portfolio of assets in prime locations across top markets,” said Alex Gellman, Chief Executive Officer of Vertical Bridge. “It would be challenging to site these towers today, and we feel fortunate to expand our portfolio into these areas and further strengthen Vertical Bridge’s offering to our partners. Since these towers have not yet been marketed to wireless carriers, they offer attractive new collocation opportunities. Our broadcast partners will also benefit from the height of these towers as they will provide good relocation options relative to the 600MHz auction repacking process.”

Alpha Media Chairman, Larry Wilson commented on the announcement, “We could not have done this without the hard work and determination from the great team at Vertical Bridge. We’re proud to call them a partner of the Alpha Media family.”

George Reed of Media Services Group is the broker for Alpha Media.

Alpha Media Closes on 116 Digity Radio Stations (Press Release)

The Alpha Media purchase of Digity’s radio stations has closed.

The $264 million deal results in Alpha owning 251 stations in 53 markets, the fourth largest broadcast company in the country by station count and the third largest by market count.

Alpha Media Chairman Larry Wilson said, “We are very pleased to get this remarkable transaction done resulting in making Alpha the 4th largest radio company in America. In our fold is now an exceptional stable of diversified stations and markets; bigger markets like West Palm Beach and San Jose, to smaller markets like Mason City, Iowa and Myrtle Beach, South Carolina serving not only their towns but surrounding areas and communities. It has been a tremendous pleasure to work with respected broadcaster, Dean Goodman, and his management team. We look forward to joining forces with the phenomenal people at Digity doing radio the right way.”

Goodman, the CEO of Digity, added, “I have been honored to work with the great broadcasters of Digity. They know their roots are in live and local and their future is dynamic. They will excel as individual and collective entrepreneurs with Alpha. We hand off a thriving company, up this year at top of the industry. I wish Larry, Donna, Bob and team all the best, they have assembled a great platform.”

RBC Capital Markets, LLC acted as sole financial advisor and Cooley LLP as transaction and regulatory counsel to Digity. 

Media Services Group’s George Reed served as broker for Alpha.

NJ Broadcasting, LLC Purchases WWRL-AM (Press Release)

Chesley Maddox-Dorsey, CEO, Access.1 Communications Corp. is pleased to announce the sale of WWRL-AM, New York City, to NJ Broadcasting, LLC for $7,000,000.*  NJ Broadcasting is owned by Dr. Nimisha Shukla and will operate the station under an LMA beginning February 1, 2016.  WWRL-AM, 1600 kHz, will provide programming for the large South Asian Community located throughout the Tri-State Area.   

Dr. Shukla, a Pediatric Physician, who also owns, 7 Days Pediatrics, located in Edison, New Jersey, is now able to fulfill a long term desire to provide a voice to the South Asian Community  through a premium broadcast media platform on a 24 hour,7 day basis.   

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

*Pending FCC Approval    

LR Telecasting Acquires KMYA-DT and KMYA-LP (Press Release)

Veteran Radio and Television broadcaster, William Pollack, of Memphis, TN, is expanding his television holdings, entering the Little Rock market, with his acquisition of KMYA-DT, Camden/Little Rock, and KMYA-LP, Sheridan/Little Rock. The acquiring company, LR Telecasting, is paying $2,750,000* to Seller, I Square Media, LLC.

Pollack also owns KLAX-TV and KWCE-LPTV in Alexandria, LA, and KIEM-TV, in Eureka, CA, as well as a cluster of radio stations in Kennett and Caruthersville, MO.  I Square Media has no other broadcast interests.

Exclusive broker of the transaction was Bill Cate, of Media Services Group. 

For more information: 

Bill Cate

501.727.5100

cate@mediaservicesgroup.com 

*Pending FCC Approval

Nielsen's Radio Market Survey Population, Rankings & Information (Fall 2015)

If you would like a copy of Nielsen's Radio Market Survey Population, Rankings & Information (Fall 2015), click HERE.

George
Media Services Group

Happy Holidays

Wishing you a happy & healthy holiday season! Sending all our best to you and yours.

Sunrise Broadcasting LLC Closes Transaction in Wilmington, NC (Press Release)

The sale of WBNE-FM and W240AS (FM Translator) in Wilmington, NC from Sea-Comm, Inc. to Sunrise Broadcasting, LLC has closed. The purchase price was $1,850,000.

George Reed of the Jacksonville office of Media Services Group served as the exclusive broker representing the Seller in this transaction. 

Thoughts on Station Pricing from Radio Ink’s Forecast 2016

Yesterday’s post dealt with some of the macro issues facing the radio station trading market going into the new year.  Today, I would like to offer some comments regarding station pricing.

The private marketplace today is trading in the 6.0x to 7.0x range, with outliers in the 5’s (primarily small markets) and occasionally approaching 8.0x (usually a strategic deal).  I believe that there is slight upward pressure on the multiples, due primarily to the lack of inventory.  My colleagues took an opposing view, citing the almost certainty of rising interest rates in our future.  They are correct that over the long term, multiples move opposite interest rates (i.e. when rates go up, multiples come down).  But interest rates are at historic lows, and we can absorb modest increases for some time before they exert sufficient pressure on multiples to make a difference.

At the present, there are qualified buyers, and there are lenders ready, willing, and able to finance transactions.  The only thing missing is good station inventory.  That will change (it always does).

The regulatory question came up, specifically whether or not a loosening of the ownership rules would help.  The short answer is “yes.”  Certainly an elimination of the subcaps would be a positive.  But the regulators seem to always lag marketplace realities.  We’ve been talking about the elimination of the antiquated cross-ownership rules for decades, yet they are still in effect.  Ironically, with the demise of the newspaper business and changes in the TV world, cross-ownership is no longer a big issue.  If the rules went away tomorrow, little would change.

One subject which didn’t come up, but probably should have, is broadcast towers.  There is a built-in pricing arbitrage which broadcasters should consider.

Thanks to Deborah, Eric, Drew, Peter, and the others who provided me the opportunity to participate in Forecast 2016.  It was great.

George
Media Services Group 

Crystal Ball Gazing at Radio Ink’s Forecast 2016

I enjoyed participating in this week’s Radio Ink Forecast 2016 in New York.  The event was well attended, and the panels informative and engaging.

My panel was entitled Prospects for Radio as an Investment in 2016: Wall Street or Main Street?  Moderated by Drew Marcus of Sugarloaf Rock Capital, the speakers included Brian McNeill, Founder and Managing General Partner of Alta Communications and Jerry Sargent, Middle Market Banking Head at Citizens Bank. Drew provided the Wall Street perspective, I talked deal making/station trading and values, Jerry talked about debt/banks, and Brian brought a private equity point of view.

Not surprisingly, there was a lot of talk about Cumulus and iHeart, specifically their balance sheet problems. My takeaway was that there was still time for Cumulus to resolve their operational issues, and work their way out of trouble.  Not so much for iHeart.

iHeart has a looming series of important bond payment due dates.  So far, they have masterfully been able to kick the can and refinance debt, albeit at much higher interest rates (with the result of a steadily increasing cost-of-capital).  But their bonds are now trading at a deep discount; that does not demonstrate much confidence on the part of the bond holders.

We talked about the impact on the industry if Cumulus and/or iHeart went through restructuring.  I believe that we would suffer through a (hopefully short) period of nuclear winter; station prices would suffer, and the lenders would likely pull back from the business.  But the thaw could get interesting.  If, for example, they decided to become a more CBS-esque type of company, focusing on the top 25 or even top 50 markets, the spinoffs into the hands of entrepreneurs more comfortable (and perhaps more skilled) in operating in small and mid-sized markets could result in a tremendous resurgence for the industry.  I contend that good operators, with healthy balance sheets, would line up to acquire the markets being spun off.

Brian indicated that there is not much love coming from the private equity world, but that family offices, with their more “patient money” approach, are an option.  On the other hand, Jerry is open for business on the debt side. Capital structures of at least 40% equity and 60% debt seemed to be a 

safe target.

Tomorrow, I will post some thoughts on station pricing which I shared with the group.

George
Media Services Group

Join us at Radio Ink's Forecast 2016

I will be on a panel called, "Do Investors Still Believe in Radio?"  Please join us in New York on November 17.  Click for details HERE.

George
Media Services Group

Financing the Future of Radio: Pillsbury at the Radio Show

Hope to see you in Atlanta!

http://www.commlawcenter.com/2015/09/financing-the-future-of-radio-pillsbury-at-the-radio-show.html

George

Alpha Media closes purchase of Morris Communications Radio stations (Press Release)

Alpha Media of Portland, Oregon announced today they have closed the purchase of radio stations from Morris Communications. The Morris purchase includes thirty-six radio stations located within the following markets; Topeka, KS; Salina, KS; Amarillo, TX; Palm Springs, CA; Anchorage, AK; Wasilla, AK; Grays Harbor-Hoquiam, WA and Wenatchee-Columbia River, WA.

When all pending deals are completed, it will bring the total number of stations owned by Alpha Media to two hundred, fifty-two. Chairman of Alpha Media, Larry Wilson commented on the acquisition, “I have enjoyed getting to know Mr. Morris and am thrilled to be adding stations that have been in the hands of such a successful and influential team. We look forward to expanding our Alpha family.”

George Reed of Media Services Group is the broker for Alpha Media.

Upon the successful completion of all pending transactions, Alpha Media, headquartered in Portland, Oregon will own 252 radio stations within 54 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.

Congratulations to Larry Wilson and Dean Goodman

Alpha Buys Digity Stations

Alpha Media has bought 116 stations in 26 markets from Digity LLC (subject to FCC approval).

I represented Alpha. Read the press release HERE.

George
Media Services Group

Great Radio article in Forbes

Doug Schoen is a political strategist often seen on the cable news shows.  He recently published an article on radio which merits a read.  Click here: Radio: The All-But-Forgotten Medium With The Biggest Reach.

George
Media Services Group

Nielsen TV Market Rankings

Here is a handy chart of the Nielsen TV markets:  CLICK HERE

George
Media Services Group

It has been a busy six months for radio

George
Media Services Group

Alpha Media to purchase Morris Communications Radio stations

Alpha Media of Portland, Oregon announced today they have entered into a definitive agreement to purchase radio stations from Morris Communications. Morris owns thirty-six radio stations in 8 markets including; Topeka, KS; Salina, KS; Amarillo, TX; Palm Springs, CA; Anchorage, AK; Wasilla, AK; Grays Harbor-Hoquiam, WA and Wenatchee-Columbia River, WA.

Larry Wilson, Chairman of Alpha Media will add the Morris markets to the ninety-nine stations currently in the Alpha Media portfolio. When all pending deals are completed, it will bring the total number of stations owned by Alpha Media to 135. Commenting on the acquisition, Wilson said, “What a wonderful thing it is to combine with such a fine stable of radio properties. They bring heritage radio stations to our platform that will truly enhance our growth opportunities extensively.”

William S. Morris III, Chairman and Chief Executive Officer of Morris Communications Company said, “We are pleased to enter into this agreement with Larry Wilson and his exceptional team. They are experienced operators that will maintain the ongoing success of these stations. We take comfort in knowing we have superior employees in each market that will continue to serve these wonderful communities.”

This transaction will be filed with the Federal Communications Commission shortly and is subject to their approval.

George Reed of Media Services Group is the broker for Alpha Media.

Upon the successful completion of all pending transactions, Alpha Media, headquartered in Portland, Oregon will own 132 radio stations and operate 3 additional stations under LMAs within 28 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 digital media and marketing company; Xapsis in Peoria, Illinois and the intimate performance venues, Skype Live Studio in Portland, Oregon and Alamo Lounge in San Antonio, Texas.

Join Our LinkedIn Group for Radio and TV Station Buyers and Sellers

If you are a LinkedIn user (and if not, why aren't you??!!), please consider joining our group: Radio/TV Station Buyers.  It is a group for station owners and prospective buyers. We have several thousand members, including many well known broadcasters. 

Our discussions are timely and relevant. Join us and participate regularly. It is a great resource for those of us in the business of buying, selling, and building value with radio and television stations.

George

Media Services Group

Alpha Media closes Fredericksburg, VA Cluster

Alpha Media of Portland, OR has closed on its purchase of four radio stations in Fredericksburg, VA from Free Lance–Star Publishing LLC.

Alpha purchased WFLS–FM, WNTX–AM, WVBX–FM and WWUZ–FM.

I represented the seller.

George
Media Services Group

Media Services Group Suite at the NAB Show

The Media Services Group suite at the NAB Show is in the Encore Tower:

 # 5505.  

NAB Show Coming Soon

The Media Services Group suite will be at the Encore for the 2015 NAB Show (April 11-16).  If you are interested in a confidential meeting, please get in touch.

George
Media Services Group