Putting a price on the Westwood/Dial-Global merger


Now that details of the deal to create a new network radio giant have been filed with the SEC, we can finally put a number on the value of the deal to merge Westwood One and Dial-Global. And trading indicates that Wall Street still approves of the deal.

According to the merger agreement filed with the SEC, the current owners of Dial-Global (a/k/a Verge Media Companies), which is controlled by the Oaktree Capital venture capital company, will wind up owning about 59% of the merged company, although it will be Westwood One that survives, since it already has public stock.

Westwood One recently cut its debt load dramatically by selling Metro Networks to Clear Channel, so it is targeted to have less than $48 million in debt when the merger closes later this year. Dial-Global’s debt target is just under $200 million. The contract provides for adjustments, depending on where each comes in relative to its target. The merged company is then planning to recapitalize with $265 million in borrowing.

Oaktree and the management of Dial-Global will receive about 27 million new Westwood One shares in the merger. Westwood One currently has about 22.6 million shares outstanding, including 17.2 million held by its majority shareholder, The Gores Group.

Based on the $5.68 closing stock price for Westwood One on July 29th, the last trading day before the merger was announced August 1st, the total equity in the deal comes to about $282 million. Add that to the approximately $250 million of debt assumptions and you come up with a total enterprise value of $532 million.

Of course, the value has gone up, since the stock price has increased since the deal was announced. Westwood One closed as high as $6.74 (8/3) since the deal was announced, but has pulled back with the severe retreat on Wall Street. Still, the stock closed Thursday (8/4) at $5.85 – still well above the pre-announcement price – and traded up on Friday.

RBR-TVBR observation: It has been tough for The Gores Group to realize value from its investment in Westwood One. The venture capital company repeatedly had to loan money to Westwood One or buy more stock to keep the balance sheet in balance. But after stepping up time and again to make those investments, things are finally paying off. This will be a much more solid company, following the sale of Metro and the merger with Dial-Global.