NEW YORK — No. 3 radio group Jacor Communications Inc. snapped up radio broadcaster Nationwide Communications for $620 million in cash Monday in the latest stage of the frenzied consolidation in radio broadcasting.
Jacor preempted an auction of Nationwide, which had been under way in recent weeks, people close to the deal said. Other radio groups looking at Nationwide, which is being sold by Nationwide Mutual Insurance Co., included CBS, Chancellor Media and Walt Disney Co.’s ABC.
These companies were given a chance to top Jacor’s bid, however, and did not pursue it. Jacor stock fell $3.25 to $42.87 amid Monday’s heavy sell-off.
In their league
Jacor had been looking for an acquisition to keep itself in the same league as CBS and Chancellor, the top two radio broadcasters which both made big acquisitions recently. The Nationwide deal adds 17 radio stations in eight sizable markets such as Dallas, Houston, San Diego, Baltimore and Phoenix to Jacor’s 172.
But the Nationwide stations generally underperform the rest of the industry. Wall Street sources said the group’s cash flow — earnings before interest, taxes, depreciation and amortization — was about $14 million on revenue of $96 million. Most major radio groups have margins closer to 40%, more than double cash flow earned by Nationwide.
Part of the reason Nationwide’s margins were so low was that the company had been buying up stations in the past couple of years that were losing money. Excluding these stations, Nationwide’s cash flow margins were closer to 30%, sources say.
Still, Jacor will have to try and improve all the group’s stations. “They were very poorly run,” said an industry source.
“The margins at Nationwide were very low, and I would assume that they could be improved dramatically,” Lehman Bros. analyst Tim Wallace said.
Jacor CEO Randy Michaels said in a statement that Nationwide had “done a tremendous job assembling high-quality signals in strategically placed markets. With our … strong presence across many of these broadcast areas, Jacor is ready to take the Nationwide stations to the next level.”