Valuing Cumulus and the other Cumulus


Now that Cumulus Media has posted the preliminary proxy for its annual shareholders meeting we not only see the first hard financials for Cumulus Media Partners (CMP) but we also get to see how the private company as valued for the roll-up into Cumulus Media. The public company headed by CEO Lew Dickey has a minority stake in CMP and manages it, but he has only supplied general reports on its performance in his quarterly Wall Street conference calls.

After the deal was struck with the representatives of Blackstone, Citadel Securities (no relation to either the radio or TV companies with Citadel in their names) and other partners in CMP to roll the company into the public company for a little over $69.5 million in Cumulus Media stock and $660 million, a total enterprise value of $740 million (including the equity stake already owned by Cumulus Media), the public announcement awaited a fairness opinion from Moelis & Company, as the financial advisor to the Cumulus Media board. That came January 31st as the board gave its approval to the deal and it was announced to the world.

Interestingly, one of the companies that Moelis focused on in its analysis of radio group values was Citadel Broadcasting, which was soon to be added to Cumulus Media as well. Also included in the evaluation were Entercom, Radio One and Beasley.

For the most recent 12 months through Q3 of 2010 (since Q4 reports were not yet available), Moelis determined that the multiples of total enterprise value to EBITDA for those four comparable companies ranged from 9.1x to 10.6x, with Cumulus Media itself at 9.2x and CMP under the deal at 10.0x. Estimates for EBITDA put the CMP deal multiple at 9.5x for 2010 and 8.3x for 2011, both within what was expected for those comparable companies.

Calculated as a multiple of broadcast cash flow (BCF), the CMP deal did come in above the high for the comparables at 8.8x for the trailing 12 months, compared to a range of 6.2x to 8.5x, with Cumulus Media at 7.6x. The CMP deal multiple moved back within the range of the comparables when projected out to 2010 at 8.7x and 7.7x.

Moelis also conducted a discounted cash flow analysis (DCF) of CMP, utilizing after-tax unlevered free cash flow estimates for 2011 through 2014. That analysis determined that CMP had an implied equity value of $760 million to $884 million. As noted above, the deal put a total enterprise value of $740 million on CMP. For Cumulus Media itself Moelis came up with an enterprise value of $940 million to $1.076 billion based on the DCF analysis.

RBR-TVBR observation: How can we get into the fairness opinion business? Moelis got paid $500K for its work, mostly crunching numbers available from public documents. Nice work if you can get it.