Station Deal Market Shows Signs Of Recovery

TV deal volume has staged a recovery thus far in 2011 vs. the very quiet years of 2009 and 2010, according to data from SNL Kagan, with TV deal volume of $185 million through April 30 of this year vs. the $19 million through April 30, 2010.  Add to that the March $2.4 billion Cumulus bid for Citadel Communications on the radio side, and Hubbard Broadcasting’s $505 million January 2011 bid for 18 Bonneville Radio stations, and 2011 is off to a roaring start vs. 2010.  In total, broadcast deal volume through April 30 is already $37 million higher than full-year 2010.

Deep data and analysis of the 2009-2010 TV station deal markets can be found in a newly-released SNL Kagan study, TV Station Deals Data Book, 2010 Edition. This study reveals that for the years 2009 and 2010, the deal market was still under the spell of the financial meltdown that started in the middle of 2008.

At first glance, the total TV deal volume of $1.157 billion in 2009 seems high, but $880 million of it came from debt-for-equity swaps and restructuring deals. In 2010, SNL Kagan registered a further decline in deal volume to just $125 million, coming from the sale of 23 stations. Cash flow multiples throughout the entire period were in the single digits for the first time since 1995, and with access to capital for nonperforming stations still being tight, $/TVHH values for stick stations declined another 25%, compared to 2008.

Total broadcast deal volume through April 2011 reached $3.1 billion vs. the $363 million of 2010. Year-to-date average deal multiples are 7.4x for TV stations and 8.2x for radio stations.

Highlights of TV station deal information available from SNL Kagan’s TV Station Deals Data Book and ongoing research include:

• $154.09 million in 1Q 2011 vs. $13.23 million in 1Q 2010.
• 15 full-power TV stations have sold through April 30 2011 vs. seven TV stations sold through April 2010.
• Average TV station multiples through 1Q 2011 have ranged from 9.9x for markets 1-25 to 7.7x for markets 26-75.
• The average TV station cash flow multiple in 2010 was 9.8x vs. the 10.0x of 2009.
• Top deal reported in 1Q 2011 was Southeastern Media Acquisition’s purchase of Community Newspaper Holdings for $73.73 million on Jan 3.
• Thus far in 2011, companies including NBC, Nexstar, Liberty Media and Daystar Television Network have been involved in the TV station deal market.

Should more financing come into the sector, there are plenty of TV station properties waiting to come to market at what can be historically attractive pricing that would give an even stronger boost to the deal market, SNL Kagan says. However, the TV station M&A discussion can be complicated by the upcoming potential spectrum auction in which some TV station spectrum may be sold in order to allocate 120 MHz of TV station spectrum to wireless carriers.

While there are some buyers of stations which may be eyeing a potential flip, to wireless companies, questions remain about whether there is a valuation impact on those that remain that could be forced to move.  These and other elements of the broadcast business will also be discussed at SNL Kagan’s June 1 conference “The TV and Radio Finance Summit,” for which more information is available here.