Broadcast M&A pick up in Q3
October 2, 2015
Broadcast station M&A volume reached $3.04 billion (€2.72bn) in the third quarter of 2015 according to SNL Kagan. Radio reached $422.1 million while TV registered deals worth $2.61 billion. The total is more than twice the combined amount registered in the previous three quarters. Year-to-date, at the end of September, radio registered a total of $663.4 million while TV deal announcements amounted to $2.75 billion.
Between Q1 2013 and Q3 2014 we registered seven consecutive quarters with deal volumes above $1 billion, mainly driven by large TV consolidation deals. Starting in Q4 2014, deal activity slowed dramatically. Between October 2014 and August 2015, we did not register a single deal above $100 million. In the past quarter, five such transactions were announced.
Due to a number of high-ranking TV deals, the TV broadcast cash flow multiple on two-year average forward cash flow rose from 8.0x at the end of Q2 to 8.3x at the end of Q3. The radio multiple remained unchanged at 6.7x.
The quarter’s top deal announcement by far was the possible next giant leap in TV consolidation, Media General Inc.’s $3.10 billion acquisition of Meredith Corp. At a 9.1x multiple of seller’s 2016/2017 broadcast cash flow, we value the 17 TV stations in 13 markets at $1.81 billion, which would make the deal the TV sector’s largest since Media General’s purchase of LIN Media LLC in March 2014.
However, this transaction might not take place, if Media General’s shareholders agree to a bid by Nexstar Broadcasting, announced on September 28th, to buy all of Media General for $4.1 billion. Nexstar’s offer is not included in our total deal volume numbers.
While the Media General/Meredith deal would affect mainly top- and mid-sized markets, another large TV station buyer, Gray Television Inc., extended its small-market foothold in Q3, paying $100.0 million for Gazette Company’s only TV station in Cedar Rapids, Iowa, and $442.5 million for Schurz Communications. At 8.5x forward broadcast cash flow, SNL Kagan allocated a deal value of $420.5 million to Schurz’s 15 TV stations and two local marketing agreements in seven markets.
Also expanding by means of a deal valued at more than $100 million was Raycom Media Inc., which paid $160.0 million for Drewry Communications Group’s seven TV stations (including one local marketing agreement).
Gray’s purchase of Schurz and Raycom’s acquisition of Drewry were both primarily TV deals, but the transactions also came with a number of radio stations, transforming Gray and Raycom into combined TV and radio station owners.
Q3’s top M&A news from the radio station sector was the merger of Alpha Media LLC and Digity LLC. Alpha Media paid $264 million for Digity’s 116 stations, which SNL Kagan estimates translates to year-forward seller’s cash flow multiples of 6.8x for the FM and 6.3x for the AM stations.
The radio station sector’s largest Q3 deal aside from the Alpha-Digity megamerger was a station swap between Bonneville International Corp. and Entercom Communications Corp. SNL Kagan estimates deal values of $25 million for Bonneville’s KEPN-AM and $20 million for the four Entercom stations.
The only other radio deals in a similar range of about $20 million were the radio part of the Gray/Schurz deal, to which SNL Kagan allocated $22 million and Educational Media Foundation’s $21.7 million acquisition of four Florida stations from non-commercial American Public Media Group.