SUSQUEHANNA MEDIA COULD NET $1.3 BILLION Industry formulas point to worth of cable, radio businesses Andréa Maria Cecil – Daily Record/Sunday News Privately held Susquehanna Media Co. could net at least $1.3 billion in the sale of its 33 radio stations and 230,000-subscriber cable business, according to formulas used in the cable and radio industries to calculate the value of private companies.
Financial analysts who cover Clear Channel Communications and Comcast Corp., both public companies, said the commonly applied mathematical formulas were rough guidelines that can be swayed by other factors.
When the formulas are calculated using York-based Susquehanna Media’s statistics and financial information, the value of the company’s radio business is about $1.2 billion and the value of its cable business is about $75 million.
In the case of private radio companies, the formula says to multiply the company’s EBITDA — an acronym that stands for earnings before interest, taxes, depreciation and amortization — by 15. In the case of Susquehanna Media, a Susquehanna Pfaltzgraff subsidiary that went on the sale block in April, multiplying the company’s 2004 consolidated EBITDA of $79.7 million by 15 gives an answer of almost $1.2 billion.
Reuters reported in a June 20 article that Susquehanna Media’s radio business could solicit bids of at least $1 billion, according to “sources familiar with the sale process.”
But there haven’t been any large transactions for several years, noted one analyst, making it difficult to predict the final sale price.
“No one really knows what someone might pay for a big group like Susquehanna,” said Kit Spring, an analyst who follows Clear Channel for Stifel Nicolaus in Denver.
But word in the radio industry is that Susquehanna Media officials want more than $1.2 billion.
“Rumor is that Susquehanna wants 17 times (EBITDA),” said David Miller, an analyst who follows Clear Channel for Sander Morris Harris in Los Angeles. “That’s not realistic given that Disney puts its radio assets up for sale and if Viacom puts its assets up for sale. There would be too much product in the marketplace.”
Speculation has been circulating that the Walt Disney Co. is preparing to sell its ABC Radio business, which owns 72 stations and broadcasts ABC News Radio and ESPN Radio, Reuters reported. Industry observers also have said Viacom’s Infinity broadcasting may sell as many as 60 radio stations, the news agency said.
Another possibility for Susquehanna Media is a management buyout.
The Wall Street Journal earlier this month reported that a group of executives is considering a buyout of not only the radio business, but the cable business, too. The newspaper also said Rick Cummings, radio division president at Indianapolis-based Emmis Communications Corp., is interested Susquehanna Media radio stations in Atlanta, Dallas, Houston and San Francisco.
Susquehanna Media is the 16th-largest cable provider in the country with approximately 233,100 total subscribers.
In the cable industry, the mathematical formula says to multiply the number of subscribers by anywhere from $3,500 to $4,000. However, the formula can be easily swayed by several factors, said Todd Mitchell, an analyst who covers Comcast Corp. for Kaufman Bros. in New York.
“You can’t really equate one cable-company subscriber with another cable-company subscriber,” he said. “First of all, cable subscribers are not a standing unit of measurement because nowadays they can take anywhere from one to three services. And second of all, not all cable households are created equal. There’s a premium to be paid for cable assets like Cablevision that are well clustered in urban markets.”
Plus, a company’s offerings — such as digital services and telephony — as well as the modernity of its plants and facilities, both influence the formula, Mitchell said.
A more appropriate number for Susquehanna Media, he said, would be about $3,250 times each subscriber, placing the rough value of the company’s cable business at about $75 million, he said.
“That’s outright, including any debt that could be assigned to it,” Mitchell added.
Susquehanna Pfaltzgraff, which has a 200-year-old history in York County, put up for sale in mid-April two of its subsidiaries: Susquehanna Media and The Pfaltzgraff Co.
New York-based Lifetime Brands last week bought Pfaltzgraff’s intellectual property and retail stores. Pfaltzgraff’s Thomasville plant, which employs about 250 people, remains on the market. |