1) Why does Radio One want to acquire the 12 urban stations from Clear Channel Communications in the top 50 markets along with nine stations in Charlotte, NC, Augusta, GA, and Indianapolis, IN? What benefits and risks?
The Reasons for acquiring the 12 urban stations from Clear Channel could be the following:
- Bigger African American Base: It would draw more African-American listeners than any other radio broadcaster and cover more African-American households than any other media vehicle targeting the audience. Plus those 12 stations include a media company (BET Holdings) which targeted the African American population by its media “Black Entertainment Television”.
- Greater advertising revenue: This …show more content…
The projections in the cash flow particularly the net revenues is slightly on the higher side which increases the actual value of the company, hence we have considered a low growth rate in the Revenue of the new markets.
3) What price should Radio One offer based on transaction and trading multiples analysis?
BCF Multiple is 18.1 as per the Exhibit 8, hence the valuation comes to
18.1x* 70572 = USD 1.27 bn
EBITDA multiple as per the Exhibit 8 is 19.4, hence the valuation based on the same comes to:
19.4x*65492 = USD 1.27 bn