Radio M&A Down Despite Big Deals
Even as Beasley Broadcast's $240 million dollar agreement to buy Greater Media and some related spinoff transactions grabbed headlines (see 1607200076), there isn't an uptick in radio mergers and acquisitions, brokers, attorneys and analysts told us. Beasley/Greater Media and its related sales are outliers, brokers said, with their scale possibly magnified by a lack of deals in other industries. Though the market for radio deals is down from where it was at this time 2015, some brokers said investors view radio in a better light. Investors increasingly see radio as a stable place to put their money, especially compared with newspapers, said Media Services Group-Chicago Director Robert Heymann: “Buyers and sellers have become more rational in their valuations of stations.”
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The transaction spawned further deals to allow Beasley to comply with FCC ownership regulations, said analysts and attorneys. That's the genesis of Beasley's announced deal to divest four radio stations in Charlotte for $24 million (see 1610180037). With those divestitures, Beasley/Greater Media is seen as likely to be approved by the FCC, said Fletcher Heald radio attorney Frank Montero and BIA/Kelsey Chief Economist Mark Fratrik. “There were some overlaps but they're taking care of them,” Fratrik said. Beasley didn't comment.
Radio dealmaking is down in 2016, Fratrik said. Data available on BIA/Kelsey's website show transactions valued at $583 million took place in 2015, but as of September, only $390 million worth of radio deals happened in 2016. That reflects transactions involving 648 stations in 2015 and 406 in 2016, said BIA/Kelsey.
Radio M&A has been largely quiet because buyers are waiting for more information, said Heymann. “Everyone is taking a step back waiting for Beasley/Greater Media to close and the CBS spin-off to occur and to see what happens with iHeart and Cumulus,” said Heymann. Both iHeart and Cumulus have high debt levels and are expected to take steps to address that debt, such as refinancing or possibly selling stations, Heymann said. With those company's moves still uncertain, buyers are holding off and keeping their powder dry, he said. CBS is separating its radio assets in an IPO.
Fratrik said the lack of radio takeovers may stem from sellers asking for higher prices than buyers are willing to pay. Countering what some brokers told us, he believes there's still “investor apprehension” about radio. If investors aren't confident, they won't finance buyers to the extent needed to pay for high-priced radio stations.
Heymann and Patrick Communications Media Broker Gregory Guy said they believe investor perception of radio has improved. Radio is now seen as a stable industry with decent margins, Guy said. “Radio has shifted from a growth industry to a more stable, dividend-type industry.”
Recent combinations in radio may seem bigger than they are because of a dearth of TV deals caused by the broadcast incentive auction (see 1610210059), Guy and Heymann told us. “The TV market is so frozen with the auction going on,” Heymann said of the auction. Attorneys have said the incentive auction's prohibition on consummating TV deals and strict communication rules are stifling full power dealmaking, but there also have been few low-power TV deals, Heymann said. Since even nonparticipating LPTV stations can't be sure that they will even exist in the future, there's little appetite for deals involving them, he said. With the TV market silent, deal watchers' eyes drift to radio, Guy said.