Emmis Acquires WBLS & WLIB New York

107.5 WBLS 1190 WLIB New York Emmis Broadcasting Hot 97 WQHT Deon LivingstonEmmis Broadcasting has acquired YMF Media’s Urban AC 107.5 WBLS and Gospel 1190 WLIB New York for $131 Million.

The duo, which will join Urban “Hot 97” 97.1 WQHT in Emmis’ New York cluster, were the final properties held by YMF Media after its absorbing of the former Inner City Broadcasting. Emmis also owns 98.7 WEPN-FM, which is operated by ESPN as part of a longterm lease agreement. Both WBLS and WLIB have operated out of the Emmis New York studios since the deal that gave YMF the intellectual property of “98.7 Kiss-FM” WRKS as part of the 98.7 lease.

The purchase will be made in two installments. $55 Million due when the sale is approved by the FCC and $76 Million in February 2015. Emmis will pay a $1.275 Million per month LMA fee until the first purchase price payment. Afterwards the LMA fee will drop to $740,000 until the sale closes.

Deon Livingston, CEO of YMF Media and General Manager of WBLS and WLIB, will become GM of Emmis’ expanded New York cluster when the LMA starts around March 1.

This is Emmis’ first acquisition in a few years following its leasing of WRKS to ESPN in 2012, divestiture of WRXP New York and WLUP & WKQX Chicago to Merlin Media in 2011, and lease followed by sale of 93.9 KMVN Los Angeles in 2009

Emmis Communications Corporation (Nasdaq: EMMS) has reached an agreement with YMF Media to purchase urban adult contemporary WBLS 107.5 FM, the No. 2 radio station in New York, and its sister station, WLIB 1190 AM, NY’s first African-American targeted station offering an urban gospel format, for $131 million in cash.

Emmis, which already owns WQHT, HOT 97 in New York, will nearly double the company’s annual station operating income through this acquisition.

“Today’s announcement is indicative of our belief in the US radio industry and our desire to increase our footprint in the nation’s largest market,” said Jeff Smulyan, President & CEO of Emmis Communications. “Emmis has deep ties to the New York African-American community, and it is with great pride we take the helm of these iconic stations.”

The purchase price will be paid in two installments. The first payment of approximately $55 million will occur promptly after the initial grant of the FCC’s consent to assignment of the stations’ FCC licenses, expected to be in the summer of 2014. The second payment of approximately $76 million will occur in February 2015. Emmis will finance the acquisition through a new senior credit facility and plans to access the institutional loan market in the coming months. Emmis expects its senior secured debt-to-EBITDA leverage ratio (calculated in accordance with the Company’s existing credit agreement) to remain below 5x following the acquisition.

The acquisition is subject to the expiration or earlier termination of the applicable waiting period under the Hart Scott Rodino Antitrust Improvement Act of 1976, a standard anti-trust review. Emmis and YMF will request early termination of the waiting period, which could allow the company to begin programming the stations under a Local Programming and Marketing Agreement (LMA) on or around March 1. The monthly LMA fee will be $1.275 million until the first purchase price payment. Thereafter, the monthly LMA fee will be reduced to $0.74 million and will continue until the second closing.

During calendar 2013, WBLS and WLIB reported approximately $31.9 million of net revenues and approximately $16.5 million of station operating expenses, excluding depreciation and amortization, resulting in approximately $15.4 million of station operating income. In addition, Emmis expects to realize approximately $3 million of annual expense savings by combining these stations with HOT 97 in New York. Pro forma for these expected cost savings, the purchase price of $131 million represents a buyer’s multiple of 7.1x the stations’ calendar 2013 station operating income.

The WBLS/WLIB operations and studios have been co-located with HOT 97 since 2012, and more than 40% of their employees are Emmis alumni.

Deon Levingston, CEO of YMF Media and General Manager of WBLS/WLIB, will become GM of Emmis’ New York cluster when the LMA commences. Levingston previously worked for Emmis in various management roles.

Moelis & Company acted as exclusive financial advisor to YMF Media in connection with the transaction. Edinger Associates PLLC served as counsel to Emmis and Greenberg Traurig, LLP served as counsel to YMF on the transaction.

Emmis generally evaluates the performance of its operating entities based on station operating income. Management believes that station operating income is useful to investors because it provides a meaningful comparison of operating performance between companies in the industry and serves as an indicator of the market value of a group of stations or publishing entities. Station operating income is generally recognized by the broadcast and publishing industries as a measure of performance and is used by analysts who report on the performance of broadcasting and publishing groups. Station operating income does not take into account Emmis’ debt service requirements and other commitments, and, accordingly, station operating income is not necessarily indicative of amounts that may be available for dividends, reinvestment in Emmis’ business or other discretionary uses.

Station operating income and EBITDA are not measures of liquidity or of performance, in accordance with accounting principles generally accepted in the United States, and should be viewed as a supplement to, and not a substitute for, our results of operations presented on the basis of accounting principles generally accepted in the United States. Operating Income is the most directly comparable financial measure in accordance with accounting principles generally accepted in the United States.

Moreover, station operating income and EBITDA are not standardized measures and may be calculated in a number of ways. Emmis defines station operating income as revenues net of agency commissions and station operating expenses, excluding depreciation, amortization and non-cash compensation, and defines EBITDA in the manner currently calculated under the Company’s existing credit agreement.

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