Chairman tunes in offer to buy Emmis

Smulyan offers $15.25 per share

Commercial radio locked in the right frequency Monday when the chairman of Emmis Communications made an offer to buy the company.

Jeff Smulyan, who serves as chair for the broadcasting chain, offered to buy shares at a premium price of $15.25 each. The deal, which would require the approval of the company’s board as well as a special committee, would result in Emmis being sold for $567 million and run as a private company.

Investors — perhaps salivating over a premium buyout — bought the stock in droves Monday. By the market’s close, Emmis had risen 21% to $16.25, significantly higher than Smulyan’s offer, suggesting investors believed Smulyan would make a new offer.

News split Wall Street analysts, however, with one analyst at Bear Sterns upgrading to “outperform” but another at Barrington Research dropping it to “underperform.”

Smulyan already owns nearly one-fifth of the company’s shares.

It’s turning out to be a crystal-clear week for commercial radio, as Clear Channel will announce today it has landed Whoopi Goldberg in a move that rivals satellite radio’s recent free-agent signings. Rival chain Entercom, meanwhile, shrugged off effects of a recent lawsuit by New York State Attorney General Eliot Spitzer to beat Wall Street forecasting of its quarterly results.

The Indianapolis-based Emmis owns about two dozen radio stations around the country, including KPWR in Los Angeles and Hot 97 in Gotham as well as magazine titles such as Los Angeles and Texas Monthly. But its ad biz has been hit by the downturn afflicting many commercial radio chains.

Emmis was also a longtime player in the local TV biz, yet despite the travails of commercial radio, it’s television that the company has been exiting in a hurry. Over the last year, it has sold stations in Tucson, Honolulu and Portland, Ore. On Monday, it revealed it would sell Orlando’s WKCF to Hearst-Argyle. Emmis now owns just two television stations.

And while radio and publishing helped boost revenues by 4% in the most recent quarter, TV sales have driven profit, helping the company run $137 million in the black in the most recent quarter.

Valuation of Emmis at $567 million would be solid but not overwhelming; company’s revenues in its most recent year were $387 million, putting the valuation at a respectable 1.5 times revenue.

Possibly sparking the Emmis offer is Smulyan’s failed bid last week to buy the Washington Nationals baseball team, a failure observers said freed up cash for the investor.

Buyout also comes amid frustrations that Emmis’ shares have lost half their value since September. Several months ago, Spitzer revealed that Emmis was among several radio chains he would be investigating.

While the circumstances of radio and Emmis are probably too specific to draw larger conclusions, news did prompt one analyst to speculate about whether it would be seen as a trial balloon for private ownership on the part of other media companies frustrated with stock prices.

Already, stock buybacks in the conglom world abound. Bertelsmann, the world’s largest private media company, is contemplating a move to buy shares that would otherwise go on the public markets.

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