Merger with “blank check” corporation will give Little Rock-based broadcast group financial clout to add to its station portfolio.
Equity Broadcasting Corp. is becoming a public company with added financial muscle for expanding its TV station portfolio and centralcasting operation.
The Little Rock, Ark.-based TV station group, which now owns 26 full-power stations and more than 100 Class A and low-power stations, began transforming itself from a closely held private company to publicly traded one over the weekend by agreeing to merge with a so-called blank-check corporation, Coconut Palm Acquisition Corp. The deal, valued at $267 million, is expected to close by June 15.
Blank-check companies raise money on the promise of merging with an operating company with good prospects.
The deal leaves Equity’s current management led by President and CEO Larry Morton in place, although it dilutes their equity in Equity. The company will be renamed Equity Media Group.
According to its 2005 annual report, Coconut Palm netted about $64 million from the sale of shares at $6 last September. The report shows that the shares are closely held, mostly by the same investors who created the company.
Those investors are led by Richard Rochon, who from 1987 to 2002 was the president of Huizenga Holdings, Inc., whose investments included at one time the publicly-held Blockbuster Entertainment Corp., Republic Waste Industries Inc., AutoNation Inc. and Boca Resorts Inc.
Here’s how the $267 million deal valuation breaks down: $153.7 million in Coconut common stock to Equity’s current shareholders; $25 million in cash to Univision Communications Inc. to pay down some of Univision’s current preferred stock interest in Equity; $11.7 million non-voting preferred stock to Univision; the transfer at closing of an existing TV station to Univision valued at approximately $15.0 million; and the assumption of up to $62 million of Equity’s debt. The terms are based on a price of $5.81 for each Coconut share.
In other words, $25 million of the $64 million that Coconut raised will be used to pay down Univision’ stock interest in Equity. The balance of Coconut’s cash along with additional borrowing the cash enables and stock will be available for station acquisitions and other operations.
The Coconut Palm shares include warrants that could raise another $110 million if the Equity operations can move the stock price up.
In prepared a statement, Equity’s Morton made it clear that Equity’s interest in primarily in Spanish-language TV stations. “Spanish-language media has tremendous opportunity for growth in the U.S.,” he said. “By combining with [Coconut], we will create a publicly-held, diversified media services company with the resources to take advantage of the vast opportunities to accelerate the growth of our Hispanic network of stations.”
But Morton also said the company intends to grow its portfolio of English-language stations, its business of providing centralcasting services and a fledgling broadcast network.
Equity’s current stations operate in 33 markets ranging from Portland, Ore., to Casper, Wyo.
The stations are affiliated with a variety of networks—Univision, Telefutura, Fox, ABC, UPN and WB. It is also developing its own network, RTN, offering popular off-network shows going back to the 1970s.
It has been testing RTN in Buffalo (on WNGS) and in St. Louis (through a Daystar Television Network affiliate, WPXS) and has begun pitching it to other broadcasters.
Equity is an unconventional broadcaster in that it operates all of its stations from a centralized master-control hub in Little Rock. All programming—network, syndicated and local—is brought into the hub, packaged and then sent to stations for broadcast.
The stock will begin trading on the OTC Bulletin Board, but the company plans to apply for a listing with Nasdaq.