Subscale Broadcaster That Could Get Bought Out
I have spent the last few months researching the broadcast stocks as the industry is primed for deregulation, mergers and acquisitions and a multiple re-rating. I have written up two highly levered broadcasters so far that look to be multi-baggers, here and here. I have also been tweeting about the opportunity for any of you who follow me.
Today I am going to stick to this theme of FCC deregulation with another interesting broadcast stock I own. Unlike the prior two writeups, which have done exceptionally well, both up over 50%, this name is down and has just as many opportunities to outperform over a multi-year period.
Here is the quick back of the napkin thesis:
Market cap of $186 million and enterprise value of only $273 million.
A diversified media portfolio including 49 owned television stations, 44 owned radio stations and a “hidden” ad-tech business growing 40% per year.
Based on recent acquisitions, the company’s fast growing and owned ad-tech business could exceed the entire value of the company allowing you to own the TV and radio business for FREE.
Owned spectrum at just six TV stations that could be worth well north of $300 million.
The remaining TV stations are located in markets where major broadcasters with cash flow are likely to consolidate and do acquisitions should station caps get lifted. Historical EBITDA at these remaining TV stations is in the $40 million dollar range and could be higher if a strategic takes over and consolidates costs. A 6.5x EBITDA multiple implies a $260 million valuation.
The 44 owned radio stations have generated anywhere from $10-20 million of EBITDA per year and could be worth $50-100 million in the event of a sale. The company owns six Los Angeles, California stations and the last comp to trade in Los Angeles sold for $82.75 million for a SINGLE station.
The company is one of the only broadcast stocks without super voting Class B shares and is a sitting duck for a takeover.
An astute investor who is well experienced in the media space recently acquired a competing TV and radio company for $200 million. This investor has tried take over other multi-billion dollar broadcasters and is now using public equity to rollup the space.
A private equity firm acquired another competing broadcaster for a $476 million enterprise value that was generating $60 million of EBITDA. This private equity firm also owns a significant chunk in the affiliate that the company I am writing up operates with.
George Soros is building a radio empire with his recent purchase of 230 stations from Audacy. In addition, George Soros has quietly been purchasing radio stations that directly compete with this company that I am writing up.
This company has a significant amount of assets including spectrum, valuable cash flowing media assets and a “hidden” digital media business growing revenues at a 40% clip with real EBITDA. The company is off the radar of most media investors given the absolute low market cap and the “micro-cap” status. Given the lack of super-voting class B stock, this company is a sitting duck for a takeover. In addition, this could be a multi-bagger with limited downside.