Hubbard and Entercom will each take over the Emmis St. Louis stations they’re buying, under Local Marketing Agreements that start Thursday, Mar. 1, ending their 34 years under Emmis ownership. While parting with the cluster is bittersweet for Emmis CEO Jeff Smulyan, investors greeted the $60 million sale by briefly hiking shares of “EMMS” to a 52-week high of $4.17 on Friday, before the stock price settled back at $3.93 – a 19% gain over Thursday's closing share price.
Emmis signed final contracts with both buyers on Thursday, Feb. 22 and announced the deal Friday morning, three weeks after first publicly saying it had reached agreements in principle with Entercom and Hubbard.
Hubbard will pay $45 million for heritage rock KSHE (94.7) and modern rock “105.7 The Point” KPNT, while Entercom will pick up “FM News Talk 97.1” KFTK-FM and CHR “Now 96.3” KNOU for $15 million.
Emmis was able to find willing in-market buyers without using a broker. Both Hubbard and Entercom already own stations in St Louis.
The sales are expected to close in Emmis’ first fiscal quarter, which ends May 31. But it’s to the buyers’ advantage to close the deals by the end of April. Under LMA terms spelled out in the purchase agreement, Entercom will pay Emmis $49,820 per month for March and April before the fee jumps to $175,474 in May. Hubbard has a similar incentive to close the deal within the next two months. Its LMA calls for monthly payments to Emmis of $321,828 per month for March and April, before more than doubling to $714,196 in May.
Entercom and Hubbard will lease studio and office space from Emmis during the LMA period.
As it has with recent sales of radio stations in Los Angeles and Terre Haute, Emmis will use net proceeds from the sales to pay down debt. Proceeds, net of transaction-related expenses and estimated tax liabilities, are expected to be approximately $41 million, Emmis says.
“The St. Louis team has been an integral part of our Emmis family since 1984,” Emmis chairman and CEO Jeff Smulyan said. “We love our people in St. Louis and the team’s performance has been nothing short of remarkable. Hubbard and Entercom are both tremendous radio operators and they are adding great people and great brands to their St. Louis clusters.”
Emmis says the transactions are subject to FCC approval as well as closing adjustments and prorations.
Hubbard is getting the highest rated stations of the Emmis cluster, which explains why it is paying three times as much as Entercom. KSHE, which marked its 50th year as a rock station in 2017, ranked second in Nielsen’s January book with a 6.9 share (6+). “The Point” was ninth with a 4.2. The two St. Louis rockers will join Hubbard’s “92.3 New Country” WIL-FM, adult hits “106.5 The Arch” WARH and sports “101 ESPN” WXOS in the market.
Entercom will add KFTK-FM and KNOU to the three-station cluster it acquired from CBS Radio in the companies’ November 2017 merger. That includes AC KEZK-FM (102.5), along with “News Talk 1120” KMOX and hot AC “Y-98” KYKY. The Emmis stations Entercom is buying are both under-performers. KNOU was tied for 14th place in Nielsen’s January survey with a 3.6 share while KFTK-FM was 16th with a 3.3.
The four Emmis St. Louis stations collectively produced $23.85 million in net revenue during the company’s fiscal year ended Feb. 29, 2017, up from $21.29 million the year before. The cluster generated operating income of $3.47 million in Emmis’ 2017 fiscal year, more than double the $1.16 million in 2016.
As reported earlier by Inside Radio, Entercom is making a management change in St. Louis. John Sheehan, the senior VP/market manager of KMOX, KEZK-FM and KYKY since 2007 is leaving that post. His successor, effective March 1, is Becky Domyan, who has been director of Sales for Emmis St. Louis and with the company since 2006. Domyan will oversee the operations for Entercom’s entire St. Louis portfolio. Her 12 years of radio experience includes roles as general sales manager and account executive.
“This is an exciting move to complement our strong portfolio in St. Louis,” said Entercom chairman, president and CEO David Field. “The transaction is part of our broader strategy to continue growing Entercom’s robust roster of brands across the country and to provide the best-in-class local marketing solutions at national scale that our advertising partners expect from us.”