Last week saw a flurry of acquisition and divestiture activity in the radio industry including news that the buyer of Disney’s radio assets, Citadel Broadcasting, wants to renegotiate to lower the purchase price. News that Citadel wants to renegotiate the terms of its buyout of ABC’s radio assets is not surprising and likely led to the 3% fall in DIS shares last week. Radio advertising has been weak since DIS agreed to the deal and valuation on M&A activity throughout media has fallen. Working against Citadel, however, is the fact that last week Entercom Communications agreed to buy 15 radio stations from CBS for same multiple of cash flow that Citadel is paying DIS.
I think most major DIS shareholders were previously aware of the possibility the deal could be renegotiated. As long as the deal does not fall apart, I don’t see it as anything more than a near-term trading issue for DIS.