Alpha Media’s Selloff Plan

The good news if you’re an Alpha fan is that not every station or market is for sale.

The bad news is Alpha doesn’t have a lot of options to raise funds, come up with more operating revenue and handle their troubling debt.

But we’re beginning to see an interesting and significant trend based on several recent Alpha market sales that appear to be the way forward in uncertain times.

  • If Alpha purchased a station cheaply, it’s saleable now – At one time the Biloxi market was a revenue/cash flow producer when Triad first bought the stations.  They paid $7.8 million in 1999.  In 2005 hurricanes Katrina and Rita (especially Katrina) wiped the market out.  The stations reportedly struggled since but the extent is hard to gauge. Assume there is cash flow.  BIA says they did $3 million in revenue in 2015.  In 1999 BIA says they had $2.5 million.  So, there is probably cash flow.

  • Buying Biloxi cheaply from Triad made the market sale possible – Key thing to remember with this Alpha-Telesouth deal is that Alpha only paid Triad around 4.5x cash flow. How do we put this – that’s cheap!  This is another sale by Alpha of a market that they got from Triad because they bought it cheap, they can sell it at today’s multiples.  Think Dick Broadcasting’s acquisition of Savannah/Hilton Head.

  • Now consider the sale of Palm Beach to Hubbard – That was not a former Triad market so in order to sell it, Alpha had to upcharge the buyer, Hubbard, and get more than they paid otherwise it would not have happened.  On $21 million of before cash flow, cash flow was probably about $8 million -- an 11x multiple.  Hubbard really wanted to own the stations in Palm Beach which is the only explanation for this deal happening.  Otherwise nobody pays $88 million for assets like West Palm.In fact, nobody pays a nickel over $50 million.

  • Paul Stone took Hubbard for more than the market was worth – Stone is the investor who put between $20-30 million into Alpha’s sinking ship, took control of the company, dismissed founder Larry Wilson and set out on a journey to monetize the decline of Alpha Media as a fire sale operation. Stone has experience doing this previously in radio at Black Crow.

  • And Hubbard has been laying people off left and right ever since – Four Hubbard markets have seen significant layoffs if you consider two of those markets fired 11 people each. To be clear, Hubbard has lots of money from other ventures including television and satellite to have both “guns and butter” (overpaying for stations and not laying off employees) at the same time.  It chose to look for cost synergies by firing personnel.

Alpha still owns over 200 stations in almost 50 markets, but can only sell properties for two reasons.

One, if they originally bought it at a low enough multiple.

Or, two, if a buyer is so motivated to own a market that they will grossly overpay as in the case of Hubbard West Palm Beach.

It’s seems everything in radio is for sale right now, but that doesn’t mean everyone can buy them.

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