SNL Kagan: Radio Deals Hit 34-Year Low

U.S. broadcast station M&A volume reached $728.9 million in the second quarter of 2016, according to S&P Global's SNL Kagan broadcast media research analyst group. The TV deal market registered $681.2 million, 80% of which came from spinoffs initiated by Nexstar Broadcasting Group Inc. to comply with FCC regulations impacting its pending Media General Inc. acquisition, announced back on January 27.

The radio deal market amounted to just $47.8 million, its lowest quarterly deal volume in 34 years, since the first quarter of 1982,

In its effort to garner regulatory approval for its Media General acquisition, Nexstar arranged for a number of spinoffs, selling a total of twelve stations in ten markets to five different buyers. The largest of these deals — and the top TV deal of the quarter — was the $270.0 million sale of KWQC (NBC / Davenport, Iowa) and WBAY (ABC / Green Bay, Wisc.) to Gray Television Inc. The other spinoffs involved Graham Holdings Company (two stations for $120.0 million); MSouth Equity Partners LP and Heartland Media LLC (five stations for $115.0 million); Bayou City Broadcasting Lafayette, Inc. (one full- and one low-power station for $40.0 million); and Marquee Broadcasting Inc. (one station for $350,000).

Six of the stations sold by Nexstar are technically still owned by Media General, but Nexstar made the announcement as the seller, with the transactions expected to close soon after approval and closing of its Media General acquisition. Nexstar reported an average 11.1x trailing seller’s multiple for the spinoffs. SNL Kagan estimates that translates to a forward (2016/17) multiple of 10.0x.

The second quarter's largest TV deal not involving Nexstar was the TV industry exit of Calkins Media Inc., which sold its three TV stations for $82.0 million to Raycom Media Inc. and American Spirit Media LLC. Due to the auction quiet period initiated by the FCC on January 12, this deal will not receive FCC approval before the end of the Spectrum Incentive Auction.

The second quarter's largest radio deal was the $5.9 million sale of four FM stations in Florida’s Ft. Walton Beach market from Apex Media Corporation to Community Broadcasters LLC. We estimate a 7.5x forward seller’s multiple for the transaction. The last quarter without at least one radio transaction worth $10.0 million or more was the second quarter of 2010.

Besides the top radio deal, other major radio transactions included two deals worth $2.1 million each. Garrison City Radio Group LLC sold WBYY-FM and WTSN-AM in New Hampshire's small (rank 123) Portsmouth-Dover-Rochester market to WBIN Media Co., and Toccoa Falls College Inc. sold three FM stations, one AM station and two translators — placed near the border tripoint of Georgia and North and South Carolina — to Radio Training Network Inc.

As was the case in the first quarter, the largest portion of the second quarter's radio deal market (59% of all stations sold) involved low-power FM translators. Following the first window of the FCC’s AM Revitalization initiative and the sale of 447 translators in the first quarter, adding up to $18.0 million, another 186 FM translators (including 100 construction permits) were sold in the second quarter for a total of $9.1 million.

Excluding construction permits and partial deals, first half 2016 radio deal volume reached $133.2 million with 223 full-power stations and 300 low-power stations sold. TV station deal volume in the first half of 2016 totaled $5.29 billion with 96 full-power and 38 low-power stations sold. While the vast majority of the TV station deal volume stems from the Nexstar and Media General merger and its spinoffs, a total of $117.6 million (15 full-power and 35 low-power stations) came from deals activity not involving either one of the merger parties.

For more details from the full report, or to speak with one of our analysts, please contact Christina Twomey at Christina.twomey@spglobal.com.