Broadcast Owner Emmis Closes Six-Station Austin Sale To Sinclair Telecable.

Story by Inside Radio

Emmis has closed on the sale of its majority stake in six radio stations in the Austin market to Sinclair Telecable. With the $39.3 million deal now across the finish line, Emmis has exited the Austin market and Sinclair now owns 100% of the cluster that it has co-owned with Emmis since 2003.

Emmis says it recognized a gain on the sale of $36.8 million. When deal-related expenses and taxes are subtracted, Emmis says it pocketed $29.5 million in cash from the transaction. After closing, Emmis paid off a $4 million term loan with lender Barrett Investment Partners and ended a $12 million revolving credit agreement with Wells Fargo Bank. In a regulatory filing, Emmis said the rest of the proceeds are earmarked for general corporate purposes, including capital expenditures, working capital and potential acquisitions and investments.

Emmis CEO Jeff Smulyan has been talking about diversifying the company’s holdings beyond its radio wheelhouse. The Austin sale – along with proceeds from its yet-to close sale of urban AC WBLS-FM and rhythmic CHR “Hot 97” WQHT New York to hedge fund Standard General – will help fund acquisitions into new areas. “We really feel that it’s time to move in a new direction,” Smulyan told Inside Radio in July after announcing the sale of its New York City crown jewels. “We’d like to tackle some businesses that are growing 5%-10% a year and see if we can make them grow a little bit better.”

The Austin sale, announced in June, includes rock KLBJ-FM (93.7), adult hits “Bob FM 103.5” KBPA-FM, regional Mexican “107.1 La Zeta” KLZT-FM, modern rock “101X” KROX, soft AC “Star 93.3” KGSR-FM (93.3) and talk KLBJ (590), along with adult alternative “Austin City Limits Radio” and “Latino 102.7,” which both air on HD Radio-fed FM translators.

The closing came two business days after the FCC issued a waiver that will allow Sinclair Telecable to keep all six stations in Austin. Under the agency’s local radio ownership caps, Bob and David Sinclair would have been required to spin-off one of the FMs when they converted their existing 49.9% stake to outright ownership.

When Emmis and Sinclair joined hands and bought the stations 16 years ago, the FCC determined ownership limits based on the contour overlap methodology. Months later when the Commission switched to using a Nielsen (then Arbitron) definition of a radio market, the cluster was grandfathered. Since the change in ownership would have ended that grandfathered status, Emmis sought a waiver to the rules in June, calling its situation “unique” with two “nearly co-equal partners” and a proposed transaction is “more akin to a corporate restructuring.” In granting the waiver on Friday, FCC Audio Division Chief Albert Shuldiner said the “unique nature of the relationship between these parties and Sinclair Telecable’s long history with the stations favors grant of the waiver.”

Bob and David Sinclair plan to rename their radio company Waterloo Media. That’s to avoid any confusion with Sinclair Broadcast Group, the television company that owns KEYE-TV in the city.

Emmis meantime has a pending deal to sell its two New York FMs after cashing out of the Los Angeles, St. Louis and Terre Haute, IN markets. Once the New York sale closes, it will only operate in its home market of Indianapolis, where it owns four radio stations along with Indianapolis Monthly magazine and Digonex, a dynamic pricing company. The company also owns its Indy headquarters and a tower site in nearby Whitestown, IN.

Emmis is in talks to sell gospel WLIB New York and still owns sports “ESPN NY 98.7” WEPN-FM New York, which it leases to ESPN Radio under a four-year deal.