WHY HUBBARD RADIO EXPANSION MAKES SENSE NOW

FROM ONE MARKET TO FIVE, THREE-STATION GROUP DOES IT RIGHT

Minnesota-based Hubbard Broadcasting is purchasing half of Bonneville’s radio markets in a deal that could indicate how smaller groups expand intelligently now that the economy is nudging its way back. Bonneville revealed this week that it is selling its radio properties in Chicago, St. Louis, Washington, DC, and Cincinnati to Hubbard for $505 million. Hubbard, which has owned KSTP (AM) in the Twin Cities (Arbitron market # 16) since 1923, has only two other radio properties, both also in that market. It has a full complement of TV stations.

Bonneville will retain its radio stations in Phoenix, Los Angeles, Seattle and Salt Lake City as well as KSL-TV there. Hubbard hasn’t owned radio stations outside the Twin Cities since it sold KOB (AM/FM), Albuquerque, to Citadel several years ago.

An Instant Radio Group

Hubbard’s acquisition of the Bonneville package makes it, in one stroke, a major, though not a mega-, radio group. The company is creating Hubbard Radio, which will be chaired by current Hubbard boss Ginny Hubbard Morris. From owning KSTP AM/FM and KTMY (FM) only, the new group will pick up four stations in St. Louis, six in Washington, three in Chicago and four in Cincinnati – 17 new properties. Here’s the list:

Chicago (ARB # 3)

WDRV/WWDV (FM)

WILV (FM)

WTLX (FM)

Washington, DC (ARB # 9)

WTOP (AM/FM)

WTLP (FM)

WWWT (FM)

WFED (AM)

WWFD (AM)

St. Louis (ARB # 21)

WIL (FM)

WXOS (FM)

WARH (FM)

KZQZ (AM)

Cincinnati (ARB # 28)

WREW (FM)
WYGY (FM)

WKRQ (FM)

WUBE (FM)

Why The Deal Makes Sense

Many industry eyeballs will be watching for details on this transaction, which is the first major radio deal of 2011.

Radio station trading has been at a virtual standstill for at least three years, as any starving broker can tell you. One big question, of course, has been when the ice will break, especially in large and major markets. The other key question has been: What will the multiples be? Radio & Television Business Report says that in this transaction it may be eight times broadcast cash flow, which is what most buyers and sellers are talking about these days.

Hubbard runs a high-class, very professional operation which has always been smart with its money. The President of another major market group told me: “Hubbard, like Bonneville, is an excellent broadcaster with strong ties to their community. Their attention to ‘localism’ including live, local talent is very good for radio and bodes well for its future. I hope this becomes a trend as opposed to the cookie cutter, cost efficient models that have been adopted by many of our country’s largest radio media companies.”

Hubbard wasn’t a player in the last big wave of radio consolidation because it was starting up a satellite TV business, which later sold to Direct TV in a deal valued at $1.6 billion. So there was plenty of cash for this deal. Hubbard is also a mature operation, which is reflected in the stations it’s buying. Several are either at or near the top of their market rankings. They’re all competitive. This was no pig-in-a-poke numbers grab.

A major reason why this deal makes sense is that Hubbard is buying proven assets all the way through. Reportedly, there are no significant changes planned for any of the stations. Bonneville’s top radio hands are going along with the deal, too. CEO Bruce Reese and COO Drew Horowitz and their staff will soon be drawing their paychecks from Hubbard Radio.

Looking Through A Long Lens

Ginny Hubbard Morris shares the DNA of a great broadcasting pioneer, Stanley E. Hubbard, who started KSTP in the Twenties and added KSTP-TV in 1948. So unlike giant mega-merger players and investment bankers, she can take a solid long view of the industry. Hubbard told Radio-TV Business Report: “We believe in the future of radio...We now know that what we all experienced a couple of years ago was related to the recession, not some underlying cracks in the broadcasting industry.”

She added: “Everything that made (radio) a good business in the ‘30s makes it a good business in 2011”.

Expect the Hubbard-Bonneville deal to at least open a lot of group owners’ eyes if not to mark the beginning of a return to healthy station trading this year.