No, it’s not an intricate new dive you’ll be seeing at the summer Olympics. It is, however, a tricky financial maneuver that could spell the Walt Disney’s Company’s exit from the radio business.
Crediting sources briefed on the company’s plans, The Wall Street Journal outlines a multi-step structure that would infuse the company with new cash and involve a tax-free spin-off to Disney shareholders.
Here’s the Journal’s scenario for Disney’s prime ABC radio real estate, which encompasses 71 stations, including plum properties in New York, Los Angeles and Chicago and the ABC Radio Networks: Disney first adds debt and draws out cash from the radio division. Then comes the spin-off: at least half to Disney shareholders, the rest to another radio company,
That’s where the “Reverse Morris Trust” comes in, a tax treatment used in 2001 by AT&T when it sold its cable division to Comcast.
There are no surprises in the Journal’s list of likeliest suitors: Cox, Citadel, Entercom and Emmis. The latter has put its TV division on the block.
The paper describes the sale process as a “soft auction” with no firm deadline for bids from interested parties.
According to earlier reports, Goldman Sachs has been retained by Disney to explore a possible sale.
Disney CEO-elect Bob Iger dodged the long-rumored radio sale issue during the company’s most recent financial-results conference call. Radio “has been a good business for us,” he said, with “significant free cash flow.” The conglomerate will continue to periodically review its asset portfolio, Iger added, but he did not indicate if it would rather buy or sell.
While earlier accounts pegged the value of the ABC radio stations at $1 billion, analysts now say the stations alone are worth between $1.5 billion and $1.75 billion and put the network assets in the $1.25-$1.5 billion neighborhood.
