Broadcast Industry Q4 2014

Transcription

1 Industry Update Broadcast Industry Q New York Chicago Boston Hartford Orlando Princeton Page 1

2 Table of Contents * Industry Overview... 3 Key Indicators... 4 M&A Overview... 5 Public Market Data About MPI * This publication is also available in soft copy on the MPI website: Page 2 2

3 Industry Overview This publication focuses on major events, developments and trends within three segments of the Broadcast Industry: radio broadcasting, television broadcasting and cable programming. Each of the Broadcast Industry segments is dominated by a few sizable players, and most firms operating in the Broadcast Industry are in the mature stage of their business lifecycle. The Broadcast Industry faces the primary challenge of limited advertising dollars, which is a key driver to revenues, and has resulted in significant consolidation among industry participants in recent periods. Other important trends and challenges are discussed below: Radio Broadcasting: This segment includes broadcasting stations, networks and syndicates that broadcast audio programming through AM, FM and satellite radio channels. Radio suffered greatly following the 2009 recession as advertising budgets were slashed and the remaining advertising dollars were largely allocated to television and internet-related marketing efforts. Overall, Radio is struggling to remain relevant in the face of competition from digital media (such as online radio) and satellite radio. Television Broadcasting: This segment consists of companies operating studios and facilities that program and deliver over-the-air transmission of audiovisual content to the public. TV broadcasting has contended with increased competition for viewing audiences and advertising dollars from online channels and a shift in consumer preferences to cable services. TV broadcasters have begun to demand retransmission fees from cable companies for the right to retransmit television broadcast programming. Retransmission fees will continue to represent an important revenue source going forward. Cable Programming: This segment consists of studios and facilities that distribute television programs through cable systems on a subscription or fee basis. This segment has experienced a widened selection of channel offerings, which resulted in an increase in the number of consumers willing to pay for upgrades to existing cable subscriptions in recent years. Despite the recent growth experienced by cable programmers, the industry faces an evolving source of competition from the Internet. As the stock price performance graph below suggests, the Broadcast Industry as a whole has outpaced the S&P 500 over the last two years. In particular, the television broadcasting segment has led the charge and continues to outpace other subsectors and the S&P, despite significant volatility during % Quarterly Benchmark Performance* Cable TV Radio S&P % 300% 200% 100% 0% - 100% Page 3 3

4 Key Indicators US Travel Statistics Total Vehicle Miles (Trillions of Miles) World Price of Crude Oil ($ per barrel) Total Vehicle Miles Advertising Expenditures Total Avertising Expenditures ($Billion) Price of Crude Oil Broadband Connections vs. Cable TV Subscriptions Broadband Connections (Millions) Cable TV Subscriptions (Millions) Broadband Connections Cable TV Subscriptions Sources: S&P Capital IQ, Bloomberg, IBISWorld. Page 4 4

5 M&A Overview Highlighted Transactions TV Broadcaster Media General Buys LIN Media Media General, a broadcaster in Richmond, Va., that sold its newspapers to bet fully on the future of broadcast television, agreed Friday, March 21, 2014 to purchase competitor LIN Media and its 43 stations. This transaction closed on December 19, Upon completion of the deal, Media General will operate a total of 74 TV stations across 46 markets in the U.S. It will reach 26.5 million, or about 23%, of U.S. TV households. Enterprise Value: $2.5 billion. Nexstar Broadcasting Group, Inc. Acquires Klas, LLC and KASW-TV, Inc. Nexstar acquired the assets of KASW-TV, the CW affiliate serving the Phoenix, AZ market for $68.0 million plus working capital from Meredith Corporation and SagamoreHill of Phoenix, LLC on October 21, The acquisition will expand the Company s coverage to 57 markets in 22 states. Nexstar acquired the assets of KLAS-TV, the CBS affiliate serving the Las Vegas, Nevada market for $145.0 million plus working capital from Landmark Media Enterprises, LLC. on November 21, The acquisition will expand the Company's portfolio to 110 television stations serving 58 markets in 23 states. Page 5 5

6 M&A Overview, cont. Industry Trends Radio Radio Subsector - M&A Activity (Announced Transactions) Radio Subsector - Median M&A EBITDA Multiples Volume ($bn) Deal Count Median EBITDA Multiple Overall Median (1) $45.0 $40.0 $ x x $35.0 $30.0 $25.0 $20.0 $15.0 $10.0 $5.0 $0.0 $3.9 $2.8 $1.5 $0.9 $0.2 $0.6 $1.1 $ x x 1 5.0x 16.7x 11.1x 11.6x Recent Transactions - Radio Radio Subsector Announced Date Buyer Target Target Description 12/7/2014 Entercom Radio, LLC Lincoln Financial Media Lincoln Financial Media Company operates radio stations in the United States. Company 12/22/2014 Alpha Media LLC Access.1 Communications Corp.- NY., Nine Radio Stations Access.1 Communications Corp.- NY., Nine Radio Stations in Shreveport and Tyler- Longview comprises radio stations located in the United States. in Shreveport and Tyler- Longview 11/13/2014 Hubbard Broadcasting, Inc. Omni Broadcasting Company Omni Broadcasting Company owns and operates radio broadcasting stations in Northern and Central Minnesota. Source: S&P Capital IQ Page 6 6

7 M&A Overview, cont. Industry Trends Television & Cable TV and Cable Subsector - M&A Activity (Announced Transactions) Volume ($bn) Deal Count TV and Cable Subsector - Median M&A EBITDA Multiples Median EBITDA Multiple Overall Median (1) $160.0 $140.0 $ x x $ x $100.0 $80.0 $60.0 $40.0 $37.5 $ x x x 27.1x 9.5x 7.9x 15.4x 9.8x 8.9x $20.0 $0.0 $17.5 $8.2 $4.7 $1.9 $1.4 $ x Recent Transactions Television & Cable Announced Date 12/10/2014 Liberty Global plc; Searchlight Capital Partners Source: S&P Capital IQ Television and Cable Subsectors Buyer Target Target Description Puerto Rico Cable Acquisition Company, Inc. Puerto Rico Cable Acquisition Company, Inc., doing business as Choice Cable TV, offers cable television and cable modem services to Aguadilla, Mayaguez, San German, and surrounding communities in Puerto Rico. Puerto Rico Cable Acquisition Company, Inc. was formerly known as Centennial Puerto Rico Cable TV Corp. The company is based in Ponce, Puerto Rico. Puerto Rico Cable Acquisition Company, Inc. is a former subsidiary of Centennial Communications Corp. Klas, LLC operates as a VHF television station in Nevada. 11/21/2014 Nexstar Broadcasting Group, Inc. Klas, LLC 10/21/2014 Nexstar Broadcasting Group, KASW- TV, Inc. KASW- TV, Inc. operates television broadcasting station. Inc. 2/1/2014 Media General, Inc. LIN Media LLC LIN Media LLC, together with its subsidiaries, operates as a local multimedia company in the United States. This transaction closed on December 19, Page 7 7

8 Public Market Data 1 Company Guideline 12/31/ Week Enterprise EV/EBITDA EBITDA Margin Market Cap/Earnings Consensus Growth (4) Ticker Close (2) High Low Value (EV) (3) LTM NFY LTM NFY LTM NFY EBITDA EPS Radio Broadcasting Beasley Broadcast Group Inc. BBGI x NA 26.5% NA 12.1x NA NA NA Cumulus Media Inc. CMLS , x 10.3x 23.1% 26.8% 6.2x 33.7x (0.2%) 33.2% Emmis Communications Corp. EMMS x NA 15.0% NA 2.0x NA NA NA Entercom Communications Corp. ETM x 24.9% 26.2% 18.7x 17.3x (2.8%) 1.5% Radio One Inc. ROIA.K , x NA 27.5% NA - 1.2x NA NA NA Saga Communications Inc. SGA x NA 24.9% NA 18.5x NA NA (14.0%) Salem Communications Corp. SALM x 18.5% 18.8% NM 22.0x 1.5% 25.9% Spanish Broadcasting System Inc. SBSA x NA 25.6% NA - 0.2x NA NA NA Median 1 9.6x 24.9% 26.2% 6.2x NM - 0.2% 13.7% TV Broadcasting Gray Television Inc. GTN , x 9.8x 33.1% 38.1% 29.8x 13.5x 21.5% 18.9% Tribune Media Company TRCO , x 14.3x 26.4% 32.6% 0.8x 27.5x (14.6%) NA Media General, Inc. MEG , x 9.9x 30.0% 47.2% NM 30.6x NM NM Nexstar Broadcasting Group, Inc. NXST , x 11.6x 34.6% 36.1% NM 26.7x 30.4% 61.2% Sinclair Broadcast Group, Inc. SBGI , x 8.6x 33.6% 37.0% 21.9x 13.3x 24.8% 54.4% Median 13.4x 9.9x 33.1% 37.0% 21.9x 26.7x 23.2% 54.4% Median EBITDA Multiples - Radio Median EBITDA Multiples - Television x 16.0x 14.0x 12.0x 1 8.0x 6.0x 4.0x 2.0x 10.4x 10.3x 8.9x 1 8.2x 8.9x x 16.0x 14.0x 12.0x 1 8.0x 6.0x 4.0x 2.0x 12.7x 13.4x 11.2x 8.1x 7.5x 7.1x Average of Medians (9.4X) Average of Medians (10.0X) Page 8 8

9 Public Market Data, cont Company Guideline 12/31/ Week Enterprise EV/EBITDA EBITDA Margin Market Cap/Earnings Consensus Growth (4) Ticker Close (2) High Low Value (EV) (3) LTM NFY LTM NFY LTM NFY EBITDA EPS Cable TV AMC Networks Inc. AMCX , x 11.3x 31.4% 29.2% 21.0x 17.9x 21.2% 22.8% Corus Entertainment Inc. CJR.B , x 9.5x 34.8% 35.5% 13.1x 12.3x 3.6% 5.3% Crown Media Holdings Inc. CRWN , x NA 75.3% NA NM NA NA 15.3% Discovery Communications, Inc. DISC.A , x 12.2x 40.6% 39.4% 19.4x 19.7x 4.4% 15.5% Scripps Networks Interactive, Inc. SNI , x 10.4x 42.8% 42.9% 19.8x 18.8x 5.4% 12.0% Viacom, Inc. VIAB , x 9.7x 31.5% 31.0% NM 13.2x 2.9% 9.8% Median 10.2x 10.4x 37.7% 35.5% 19.6x 17.9x 4.4% 13.7% Median EBITDA Multiples - Cable x 16.0x 14.0x 12.0x 1 8.0x 6.0x 4.0x 2.0x 12.1x 9.8x 9.9x 10.2x 9.2x 8.1x Average of Medians (9.9x) Page 9 9

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