[opendtv] Re: Nice multiple!
- From: "John Willkie" <johnwillkie@xxxxxxxxxxxxx>
- To: <opendtv@xxxxxxxxxxxxx>
- Date: Fri, 5 Jan 2007 08:24:13 -0800
You're confusing terms. "Earnings" means just that: what you walk away
with, after taxes or before (must qualify).
EBITDA is a different metric, one commonly used by broadcasting and other
high-margin businesses. It's "Earnings before Interest, taxes depreciation
and amortization."
Companies report earnings to the SEC, etc. EBITDA is used for different
purposes. If you use EBITDA in reporting to the IRS, you would be
increasing your earnings artificially.
Then, there's comparing a manufacturing business in a dynamic yet mature
market with broadcasting. Uggh!
Broadcast station multiples have been inching upwards for years. I know of
stations that have sold for 16x. The current normal range is 11 - 15%.
This is in the middle of the range.
One needs to keep in mind that broadcast stations have little capital gear
(minimizing the I, D and A in EBITDA) as related to their revenues. It's a
different issue with manufacturing companies.
John Willkie
> -----Original Message-----
> From: opendtv-bounce@xxxxxxxxxxxxx [mailto:opendtv-bounce@xxxxxxxxxxxxx]
> On Behalf Of Craig Birkmaier
> Sent: Friday, January 05, 2007 6:24 AM
> To: OpenDTV Mail List
> Subject: [opendtv] Nice multiple!
>
> One way to value a business that is being sold is in terms of
> multiples of earnings (EBITDA). Some rapidly growing companies can
> demand very high multiples. Companies in trouble may have multiples
> at 1 or below. The average for sales of private companies is about 5
> times EBITDA. IN the TV equipment manufacturing industry we have seen
> significant consolidation at very low multiples - the first time GVG
> was sold the multiple was well below 2. WHen you see a multiple of
> 13.3 for a business that is said to be on the decline, it tells you a
> great deal about the industry that the business is in.
>
> Craig
>
> http://www.broadcastingcable.com/article/CA6404372.html?display=Breaking+N
> ews
>
> Breaking News
> NY Times Co. Finds Stations Buyer
> By Michael Malone -- Broadcasting & Cable, 1/4/2007 5:30:00 PM
>
> The New York Times Company has a buyer for its nine television
> stations, which it put on the block in September. Private equity firm
> Oak Hill Capital Partners agreed to pay $575 million for the
> stations. The deal, which awaits regulatory approval, is expected to
> close in the first half of 2007.
>
> The sale price represents a 13.3 times multiple on $43 million of
> EBITDA (Earnings Before Interest, Taxes, Depreciation and
> Amortization), according to Prudential Equity Group analyst Steven N.
> Barlow. Analysts called it a good deal for the NY Times Company.
>
> Oak Hill Capital Partners managing partner J. Taylor Crandall
> commented, "The New York Times Company Broadcast Media Group is one
> of the industry's most admired franchises because of its heritage
> television stations, its commitment to quality news and serving the
> local community, and its outstanding employees."
>
> The nine stations, a mix of NBC, CBS, ABC and MyNetworkTV affiliates,
> are: WHO Des Moines, KFSM Ft. Smith, Ark., WHNT Huntsville, Ala.,
> WREG Memphis, WQAD Moline, Ill., WTKR Norfolk, KFOR and KAUT in
> Oklahoma City, and WNEP in Scranton.
>
> In 2005, the latest year BIA Financial Network has figures for, the
> stations had revenue of $157 million. According to the formulation
> used by the FCC, the stations cover 3.2% of the nation's TV
> households.
>
> A spokesperson from the Times Company said the stations were unloaded
> to allow the company to focus on its "rapidly growing digital
> properties and newspapers." The Times Company's papers of course
> include the flagship Times, along with the International Herald
> Tribune and the Boston Globe. The company still owns two New York
> City radio stations and a host of Websites, including About.com.
>
> Oak Hill Capital Partners, with offices in New York, Stamford and
> Northern California, was part of a consortium that unsuccessfully
> attempted to purchase the Knight Ridder newspaper company last March.
> According to its Website, Oak Hill has more than $4.6 billion
> invested in a wide range of businesses, ranging from restaurants to
> pharmacies to southwestern cable operator Wometco Cable Corporation.
>
>
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