Prime Radio sell network to Grant Broadcasters

Prime Media has announced their exit from the radio industry, selling their Queensland radio network to Grant Broadcasters at a heavy discount from their investment levels.

The Prime Radio network consists of Hot 91 and Zinc Sunshine Coast, Zinc and 4RO in Central Queensland, 4MK and Zinc Mackay, 106.3 and Zinc Townsville, and 4CA and Zinc in Cairns.

Grant Broadcasters has acquired the stations for $24.525 million, plus surplus cash to be determined at the date of completion. The sale is expected to complete on 30 August.

The venture into radio by Prime Media has been a disaster.

After acquiring the radio assets for $77m over six years, they have impaired the book value annually, and have now sold for over $50m less than the acquisition price.

A year ago Prime CEO Ian Audsley commented on offers that had been received for the radio network over the last two years as 'insulting'. It is believed that these offers were well above what Grants have paid, however as the earnings continued to fall, so did the price.

Presumably, the Prime Media board now feel it is less insulting to exit before the business declines further.

Notwithstanding the low sale price in the context of the price Prime paid to acquire the assets, Grants are believed to have paid a reasonably full multiple for the business.

The sale multiple is believed to be around 8.0x EBITDA. Whilst full, this is based on softening Prime earnings and so is an enticing price for strong radio operators.

In FY11 Prime reported earnings of $4.8m, in FY12 they reported earnings of $4.3m, and it is believed the earnings in FY13 will be signficantly lower than that.

This is the third regional radio transaction in Queensland over the last couple of years.

• Grant Broadcasters acquired Hitz FM and 4BU in Bundaberg from Fairfax at what was believed to be a multiple of 7.6x EBITDA

• EON Broadcasting acquired Sea FM and Mix FM on the Sunshine Coast from SCA in a forced sale for a multiple of 6.2x EBITDA

Grant Broadcasters now have a solid footprint in every state in Australia, in some very attractive markets. 

The acquisition places Grant Broadcasters in competition with Southern Cross Austereo in Cairns, Townsville, Mackay and CQ, and with EON Broadcasting on the Sunshine Coast.