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Emmis Communications Sells 9 TV Stations for $681M

Posted on: Monday, 22 August 2005, 21:00 CDT

Aug. 23--Emmis Communications Corp. took its first steps toward refocusing itself as a radio station operator on Monday, selling nine of its 16 television stations for $681 million.

The Indianapolis-based company announced earlier this year that it was weighing whether its money could be more profitably invested elsewhere.

Industry watchers said the move signals Emmis is likely to buy more radio stations, adding to its collection of 23 that include WKQX-FM and WLUP-FM in Chicago.

Emmis went into television seven years ago, and though its TV operations showed a profit last year, the company found that operating both TV and radio stations more complicated than anticipated, said Jim Goss, a media analyst with Barrington Research in Chicago.

"While they did reasonably well in television, it posed an element of confusion for the stock," he said.

Investors view radio as a more attractive play than television Emmis officials felt the combination meant they weren't getting appropriate market value for their radio holdings.

Emmis spokeswoman Kate Snedeker said the sale wasn't driven by that issue, although she confirmed that company officials were aware of it.

"We have heard from Wall Street before that the radio and television businesses were confusing," she said. "They'd be more interested in a pure play."

She said the purchases will allow the company to pay down debt and free funds for investment.

"It gives us additional resources to pursue strategic alternatives, which could include opportunities in the radio arena," Snedeker said.

Emmis traded at below $16 a share when the company announced it was looking into a sale. Since then, it climbed to over $21. It closed Monday at $23.58, up $1.98 on news of the sale.

During the company's short stay in the television business it anticipated that cable operators would begin paying broadcast companies for the rights to local station signals, and that it would be able to pull together new content and sell it to digital subscribers as a low-cost alternative to cable TV.

Neither event came to pass, said Robin Flynn, an industry consultant at Kagan Research.

"Those things were more challenging and took longer than they had hoped," she said.

Even so, the company's investment did not go to waste.

Television advertising revenues have generally climbed over the past several years. The company sold the stations for $481 million over their book value.

"They really were able to grow them significantly," said Flynn.

Emmis reported $276 million in radio revenue last year, up nine percent from the previous year. The company brought in $265 million in television revenue, up 12 percent from the prior year.

The stations being sold serve Mobile, Ala., Terre Haute, Ind., Green Bay, Fort Meyers, Fla., Omaha, Neb., Tucson, Ariz., and Charleston, W.V.

The sales were split among three buyers, LIN TV Corp., Journal Communications and Gray Television.

Emmis continues to own stations in Orlando, New Orleans, Portland, Ore., Topeka, Wichita and Honolulu.

"We continue to get interest," from potential buyers, said Snedeker.

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Source: Chicago Tribune

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