Radio’s deal market waiting room is likely to get more crowded in the coming months as radio executives sit on the sidelines awaiting word from the Federal Communications Commission about what it intends to do with local radio ownership caps. Townsquare Media co-CEO Dhruv Prasad says there are several potential moves already simmering, however he doubts much will bubble up until something definitive happens in Washington.
“We've probably seen more potential deal flow this year than we have in a couple of years, but I do think the big unknown out there is still deregulation and what might occur in terms of ownership consolidation as a result of that,” Prasad said. He told analysts on the company’s quarterly earnings call that he expects not much to happen in the meantime. “I think to some extent people are waiting, sellers are potentially waiting to see what happens with new FCC rules,” Prasad said.
FCC chair Ajit Pai has said launching the quadrennial media ownership review is one of his top priorities in the remaining two months of 2018. While he hasn’t offered any details of what may be looked at, it’s widely expected the Commission will consider repealing or altering the current AM/FM subcap rules.
Deal multiples have largely been in the six-times cash flow range during the past several years and the FCC’s potential deregulatory maneuvers could inch deals higher. Prasad said he currently views the market “somewhere between six and eight depending on the situation, depending on the quality of the assets.”
With a focus on small and mid-market radio, Townsquare has grown a portfolio that includes 321 stations across 67 markets. Only iHeartMedia and Cumulus Media own more stations. While not growing as much as it once did, Townsquare has struck three separate deals in the past year. Most recently it closed a $17 million deal to at long last give its top-rated Trenton, NJ market three sister stations including CHR “94.5PST” WPST, sports “920 The Jersey” WNJE and religious 1040 AM” WCHR (1040). That followed earlier deals to add stations in the Utica-Rome, NY and Pittsfield, MA markets.
“We’re always looking for attractive M&A opportunities,” Prasad said. “I think in the last 12 months we have found three that met both our price criteria as well fit our market profile—two of them importantly were tuck-in acquisitions to existing markets which is a high on the priority list in terms of allocation of capital.”
As of Sept. 30 Townsquare had a total of $49.6 million of cash on hand. And in a signal no sizable acquisitions are in the immediate future, the company announced some of that money will be returned to investors. The board of directors has approved a quarterly cash dividend of $0.075 per share. The dividend will be payable on February 15, 2019 to shareholders of record as of the close of business on December 27, 2018.
But even as it pays a dividend, Prasad told analysts he’d still like to grow Townsquare. “It’s hard to predict how that will come together and what the flow will be over the course of the next 12 months,” he said, adding, “We continue to be very active on the M&A side.”