Trying to get handle on valuation:
Here's what i have (admittedly most back of envelope)
35 million of EBITDA for remaining biz times 10 EBITDA Multiple = 350 million gross valuation for continuing ops.
Less debt: 330 million minus 6 million for California towers minus 110 for cash in today's deal minus 110 million from grupo radio deal nets total debt of 104 million.
so far 350 million minus 104 = 246
plus value of investment in today's deal 47 million = 293
less Emmis Preferred of $140million = 153
153/40 million shares outstanding = $3.82 per share of value at a 10X's EBITDA multiple
One wild card: does anyone know valuation of Emmis HQ? company has close to $30 million of land and buildings on balance sheet - i assume most of that relates to the headquarters
True but the trading value in the preferred seems to indicate that there is some skepticism out there. Just seems like a huge opportunity for the company to create value for the common. maybe they can purchase shares in the open market. Not sure if they can do this if there is an arrears but if they get banks/canyon to cooperate...
With this transaction why would the preferreds take anything less than face & accum dividends? The net debt is down to about $50 million and the pfd is trading at 1/3 of face & accum divdidends. The pfds sound like the right security to be in.
Last time the offer was to exchange the pfds for a sub debt with a face value of $30 per preferred share. Alden who was taking EMMS private with management held 41% of the pfds and a dissident group held 34%. Since 2/3 of the pfds are required to remove the redemption at face & accum dividends upon buy-out clause in the pfd and Alden and mgmt was not able to come up with an acceptable deal for the dissidents, the deal fell apart.
One thing seems for sure: If they closed on a $110 M deal to sell LA tomorrow, the stock would climb to $2+.
Eventually, value will win out here, and this will be a $3-5 stock. The only question is whether that is 1, 2, or 3 years from now. Or taken private for $2.50-2.95 before the year is out? (Which, as a near 2% holder, I'd support, at this point...as long as it were announced sooner rather than later.)
I definitely was not suggesting that a buy-out was in the cards. I merely said that a buyout "would be" required for a significant price movement, as I believe the station sales are fully reflected in the current stock price. Just my opinion, of course.
Strangely enough, today's Inside Radio suggests that a going private transaction is NOT in the cards. But the commentary around the subject seems opaque...or even to lead one to the opposite conclusion. Is this a "ruse"?
Smulyan tells Inside Radio that while he can’t rule out [sic..should read
"doesn't anticipate"]further deals with Merlin, or any other station sales, it’s something that can never be entirely ruled out. “We’ve talked openly about selling these three stations, and there are no active plans to sell anything else.” A fresh attempt at going private is also not the end game either. Emmis has talked about partnering with other investment firms once its refinancing is completed. “The most important thing is to keep this company going, and this gives us a chance to see better days,” he says.
insideradio.com ($) to subscribe, and get the full story. (There are multiple stories on this transaction in today's issue.)
Unfortunately, I think the market has spoken, and while the trading range may have increased by 10 cents or so, I do not see any significant additional movement until a possible buyout offer would emerge. The station sales have been anticipated since last fall, and apparently the market has not attached a significant premium to the transaction. That being said, a buyout by Smulyan or a third party would now be a much less onerous proposition, and could hopefully be consummated this time with the right financial partner. Just my opinion, of course.
I included the station in my original post on this thread for $110 million.
For me one of the main open items right now is the value of the Headquarters bldg in Indianapolis - It's on a prime lot of real estate and according to this cost $25 million to construct - http://www.ratioarchitects.com/assets/uploads/Emmis_Corporate_HQ-ext_2.pdf plus
makes sense for them to sell it and use the proceeds to pay down debt - I think its referred to in the bank documents with the california tower so I imagine something is in the works.
would be great when company is in compliance with bank covenants to be able to go into market and start buying up preferred, which now is trading at $0.40 on dollar or $0.33 on the dollar if arrears is factored in.
The LMA for the Los Angeles radio station started on April 15, 2009 and continues for up to seven years, for $7 million a year. At any time during the LMA, Grupo Radio Centro (GRC) has the right to purchase the station for $110 million. At the end of the term, Emmis has the right to require GRC to purchase the station for the same amount.
No doubt about it, the sale makes Emmis much more attractive as a going concern, or as a potential take-over target, due to the reduced debt. Remember, the LA station deal is still out there for $110 million, which has not been booked yet. I don't recall if that deal obligates the purchaser to buy the station, or gives them the option to buy the station in the five year period.
By the way people, we should move this discussion over to Investors Hub, which is a much better forum for discussing companies, and where I spend 90% of my time researching and discussing my portfolio companies.