Well, that didn’t last very long! Newspaper and radio stocks soared on Monday in response to Jeff Smulyan’s plan to take Emmis Broadcasting private. EMMS shares quickly went above the offer price and investors jumper on radio and newspaper stocks, apparently seeing the EMMS deal as a sign of value for depressed traditional media assets. For long suffering shareholders, the gains didn’t last as Tuessday’s session saw about half of Monday’s profits erased.
I guess the prospect of M&A activity has been heightened with the EMMS deal following closely on the McClatchy-Knight Ridder deal, including the resale of several of KRI’s papers. I have noted that M&A activity in European media has been prolific of late so maybe investors feel that U.S. radio and newspaper stocks have finally gotten cheap enough to attract the interest of private equity.
I just don’t see it. The KRI deal and the subsequent asset sales didn’t reveal aggressive bidding by private equity. Neither did the deal indicate that strategic industry buyers are ready to make big acquisitions. The EMMS deal isn’t priced at a premium compared to the sale of Disney’s radio assets. I’ve followed EMMS for a long time and I really think that Jeff Smulyan wants to continue to own it. It would be a major surprise if he didn’t and is just fishing for another bidder. If so, he had to know he risked he losing his company if he low-balled the bid. I suspect Jeff knows that other buyers aren’t waiting in the wings to pay a big premium. We shall see.
In my 24 years in the business, one recurring money-making opportunity has been to be long media stocks when M&A activity is picking up. I suppose it is risky for me to say this time is different but I don’t see the combination of private equity and industry money that will fuel big gains. Most media companies are slimming down or restructuring. There just don’t seem to be many industry buyers and even though the stocks are depressed, multiples, especially in radio and newspapers, don’t look cheap enough to justify big returns in leveraged acquisitions. I hope I am wrong.