Entercom buy stuns Street
NEW YORK — Sinclair Broadcast Group has agreed to sell 43 radio stations to Entercom Communications for a tidy $821.5 million in cash.The sale had been expected since early June, when Baltimore-based Sinclair announced it was considering selling its radio business or spinning it off into a separate public company. Wall Streeters were a bit surprised, however, that the stations ended up going to Entercom, as Cox Radio had been seen as a front-runner. Giants Clear Channel Communications and CBS Corp. were also viewed as potential buyers but may have had overlapping stations with Sinclair in too many markets to make a deal possible, analysts said. Proving that radio assets haven’t lost their allure, the price represents a very rich multiple of 18-19 times next year’s estimated cash flow, which makes Sinclair happy. “The deal dramatically highlights the value of our radio division,” said CEO David Smith. A slimmed-down Sinclair, which will become a pure television broadcaster, “is now positioned to take advantage of the next wave of station consolidation, the advent of digital television and the conversion of television and the Internet,” Smith added. Sinclair had said it wanted to divest or spin off its radio assets because they weren’t properly valued within the combined company. It also needed cash to pay down debt, which is just what it plans to do with much of the $650 million in net proceeds it anticipates from the sale. Some of the cash may also go toward acquiring more TV stations, buying back stock or making other strategic investments, the company said. Bill Meyers of BancBoston Robertson Stephens noted the steep pricetag bodes well for Sinclair’s negotiations with Emmis Communications over Sinclair’s remaining radio stations in St. Louis, along with one TV station in that market. Emmis, another radio and TV broadcaster, has the rights to buy those particular properties. In an unusual transaction last month, Emmis bought those rights from former Sinclair exec Barry Baker — now the president of USA Networks. Sinclair, which announced its deal after the market closed, said its letter of intent with Entercom of Bala Cynwyd, Pa., will turn into a hard and fast purchase agreement in about three weeks, following a period of due diligence and negotiation. Including pending transactions, Entercom owns 42 radio stations. The letter also calls for Entercom to buy $5 million in advertising on Sinclair’s TV stations over five years and to pay for up to $2 million in capital improvements. Sinclair shares dipped 50¢ Monday to $17.38. Shares of Entercom, which went public last year, fell $1.31 to $37.13.
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