Tuesday, May 13, 2008

Radio: No bull


Were you the least bit surprised? I hope not.

The Cumulus-Merrill Lynch deal-gone-dead news was secondary to the Clear Channel soap opera, but it shouldn’t have been. There are lessons to be learned.

Even $26 a share is unrealistic for Clear Channel.

I’ll credit CC Outdoor with the success of their new digital billboards, which I read about in this study.

But I do have a question. What happens when gas climbs past $4-plus a gallon and the civilians revise their driving habits. Fewer eyeballs, less often.

What’s left in CC radio to do except suck marrow from the bone?

At least someone had the superior intellect and business sagacity to realize that the Cumulus deal was doomed.

One question. What took so long? This one should’ve been quashed back in mid-February when the gelded bulls at Merrill-Lynch owned up to the largest loss in the company’s history - $8.6 billion.

When Cumulus struck that absurd go- private deal with Merrill Lynch Global Private Equity its stock was trading at $11.75. By mid-February, Cumulus was closing around six bucks and change and those on the Merrill-Lynch side that did the deal with Cumulus were no longer in the building.

I said it then and I’ll say it now. Never write a deal on a cocktail napkin after the fourth martooni.

18 comments:

Anonymous said...

Ego gets in the way. They had opportunities to undo this deal in the past and emotion got in the way. They fared okay. If Cumulus is smart they will put stations on the market in regional groups at a reasonable price now.

Anonymous said...

I thought Lew Dickey was smarter than that considering his Harvard MBA that he likes to talk and talk and talk and talk about

Anonymous said...

The failure of the Cumulus deal has nothing to do with radio.

Take the radio blinders off and look at the big picture.

Since the home loan crisis, banks and equity companies have been in hard shape. Far worse shape than broadcasters. No broadcasters are defaulting on their payments. But home owners are.

So the situation Merril Lynch was in when it began talks with Cumulus has changed. Just as the banks and CC. But Merril Lynch was able to negotiate an exit, and the banks couldn't.

Cumulus is not going to be selling any radio stations. They are not in any financial trouble. The only reason they wanted to go private was to eliminate the quarterly reports. And maybe give them a big of capital to make other improvements.

Anonymous said...

Dickey will buy back stock. He will be better off this way. If he really knows what he is doing he will start to unload properties. In radio it is not the one who dies with the most toys wins. It is the one with the most profitable and manageable toys wins.

Anonymous said...

Gorman, you usually write clever stuff. How long did it take you to do this one. Five minutes? Not your usual style. Lew Dickey is not exactly an interesting person. I would rather get your opinion on what came down with CC today. i look forward to your new blogs. Don't let me down.

Anonymous said...

Can you say PRICES SLASHED?????
Coming soon.

jan said...

Merrill Lynch got off lucky. If we thought the banks had problems with subprime loans just wait until they unearth the bottomless pit of problems at Clear Channel. Lew Dickey will buy back stock and put most of his stations on the block and be wiser for it.

Anonymous said...

How soon can we expect the next round of layoffs at both Cumulus and Clear Channel? I bet John Hogan is staring at his phone saying to himself - Randy, please call me.

Anonymous said...

"Lew Dickey will buy back stock and put most of his stations on the block and be wiser for it."

You obviously don't know Lew at all.

What he will do is transfer some stations from the publicly-traded part of Cumulus to his privately owned Cumulus Broadcast Partners.

He is definitely NOT interested in letting any properties go.

Anonymous said...

lew dickey played m-l. he was going to win either way. he would either get his price from m-l to take cumulus private or the deal would fall apart which it did and ended up putting that breakup money in his pocket. lew is a smooth operator. smart guy even if he reminds you of that fact too often.

Anonymous said...

People who have to "remind you" of characteristics of their past are usually insecure little babies. Those that are truly exceptional let their accomplishments speak for them.

Anonymous said...

I agree the Cumulus deal was folly from the start. Clear Channel at $36 is a very attractive price. And here's why, for anyone who's into economics. The rising price of oil is basically driven by one thing: The declining value of the dollar. The Fed has engineered for us an extremely inflationary environment. (read up on money supply for more background.) It takes years for inflation to work its way into pricing throughout the economy, but the barrel of oil is the canary in the coal mine. Even more reflective of true inflation than gold. So as inflation continues over the next couple of years (hopefully no more), the CCU deal gets cheaper and cheaper in real dollars.

Those of you old enough to remember the 70s know that this is nothing we haven't seen before. We bought the Vietnam war at 60s prices and paid it off in 70s and 80s dollars. Given the way inflation ran in those days, we knocked the price of the war in half in real terms. Same thing is happening today with the Iraq war and our other deficits.

Those companies and individuals taking on debt now will be rewarded in the out years as their debt will shrink in relation to the deflated dollar. The investors bought CCU at today's prices and will be able to pay for it in deflated dollars. Nice deal.

I cash out the last of my CCU options today and it's time to look for other opportunities. Penn National is one such opportunity, for those inclined to take risk. Remember, never let your emotions cloud your decision making when it comes to investing.

Anonymous said...

so the cc deal gets done and you got nothin to say so you jump into the dickey's stuff when you should be tailing your philly bud and swinging your little bat at farid count me disappointed in you bitch

david5258 said...

john-newyorkpost reported this afternoon that ccu got a NINTH bank to join the sucker list so the mays family can continue to suck radio dry.

on a bright note, matt patrick at whlo640 is proving that LOCAL TALK is DOABLE and DONE RIGHT... kudos to kk for allowing matt to spread his wings...

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