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April 02, 2007
Monday Morning Media Madness
Here is your Monday Morning Media Madness in honor of tonight's final game of March Madness.
• Is anyone else bored by the prospect of another national title game between Buckeyes and Gators? Probably not CBS (CBS) which is enjoying a good year in ratings for the hoops tourney, up 2% vs. a year ago. Two national powers rated in the to 4 all year should bring in another night of good ratings. I'll still be watching 24.
• The weekend box office slumped more than 10% vs. a year ago as OK openings for Blades of Glory and Meet The Robinsons had no change against the $68 million opening for Ice Age II> a year ago. For the sake of comparison, that $68 million is on par with Pixar's latest release Cars which debuted last summer. Disney (DIS) probably won’t be too worried about Meet The Robinsons as it didn’t bomb and it is the final animated picture that was pretty much completely done prior to the Pixar acquisition. The next picture film, Ratatouille is in theatres at the end of the June, a full month following the next film in the Pirates of the Caribbean franchise....
• Rogers Communications popped on Friday, probably due to rumors out of Canada concerning BCE (BCE). Speculation surrounds a private equity led buyout of Canada's largest telecommunications company or a merger between BCE and one of Canada's other major wireline and wireless companies, Telus (TU). Either outcome would be positive for RG. A private equity led buyout would challenge foreign ownership rules – RG is the perfect acquisition for Comcast (CMCSA/K), in my opinion. A merger of BCE and TU would eliminate one competitor in the already vibrant Canadian wireless market which is the driver of RG's growth.
• ISS issued a NO recommendation for institutional shareholders last week on the Clear Channel (CCU) buyout. This likely spells doom for the deal. I think CCU goes lower if the deal is voted down but nobody on the street seems too concerned as a higher bid, a new bidder or self help recapitalization is presumed to be waiting in the wings. I think radio multiples ate 11 times EBITDA are way overvalued. Ratings think, advertising growth is poor, and expenses are going up as station owners attempt to fight back. With most of the rest of media between 8 and 10 times EBITDA I think significant multiple compression lies ahead for radio stocks.
• We may hear a final result on the auction of Tribune (TRB) this week. Two bidders exist, offering $33-34 per share. Be careful on the structure of these deals as neither appears to promise full payment of the takeout price in one step. If there is any significant lag or a highly leveraged equity stub left outstanding investors will have to deal with accelerating declines in newspaper advertising as real estate classifieds join autos and help wanted with negative comparisons.
• Discovery Communications (DISCA) bought out one of its minority partners paying cash and assets for the 25% stake held by now private Cox Communications. DISCA is a tracking stock with a business singularly focused on cable networks. I have concerns about slowing growth in the cable network business but if the other partner were bought out and the tracking stock structure eliminated I could get interested in DISCA from the long side at the right price. That price is a significantly below current trading levels, however.
Posted by Steve Birenberg at April 2, 2007 04:10 PM in Media
