Journal Still On The Hunt For Acquisitions

Journal Communications declared itself a would-be station acquirer some time ago as it paid down debt by selling non-core assets. But Wall Street analysts noted in the quarterly Q&A with management that Journal was absent from the recent string of TV deals and wanted an update on the company’s M&A strategy.

“What are you waiting for?” asked analyst Barry Lucas of Gabelli & Co. after noting that $2 billion of TV deals had been announced in less than 12 months, while Journal bought only two radio stations in Tulsa.

“People know we’re interested. We do get the calls and we do our work, always with long-term shareholder value in mind,” said Steve Smith, chairman-CEO of. His view is that the company will continue to evaluate opportunities and see if there is strategic benefit from a potential acquisition.

“Every deal seems to be different,” he said of the recent series of TV acquisitions, with strategies for the acquiring companies ranging from duopolies and corporate expense reductions to other considerations that build value, not just scale.

Journal ended 2Q with bank debt of only $21.4 million, so leverage is minimal. Smith says management would like to increase that leverage by making acquisitions and he thinks investors would prefer that to a resumption of cash dividend payments, which were suspended in 2009 due to the national recession.

“We recognize that the leverage is not optimal for some investors,” said Andre Fernandez, president-CFO, who reiterated that Journal remains on the “acquisition hunt.” But he said price multiples for the recent TV deals that had been alluded to were more than the current Wall Street multiple for Journal’s stock, which makes stock buybacks more accretive than station purchases.

Even so, Fernandez said he is still looking for M&A opportunities, with a bias toward television, particularly mid-size markets, while not ruling out additional radio acquisitions to fill out existing clusters.

TV, not surprisingly, is looking to be stronger for Journal in 3Q than radio. Not only is TV benefitting from political spending, but three of Journal’s 13 TV stations — including flagship WTMJ Milwaukee, its largest station — are NBC affiliates which will carry the Summer Olympics from London.

Smith noted that the last Summer Games in 2008 brought in $2.3 million of advertising for Journal’s NBC stations and the company is on track to exceed that figure this year.

After reporting an 18.4% gain in broadcast revenues for 2Q, Fernandez told analysts that 3Q broadcast revenues are expected to be up in the low double digits including political and up high single digits excluding political. TV is expected to be up more than radio, but he declined to break out those pacings. Publishing is expected to be down again, slipping by a percentage in the mid-single digits.