Radio Disney Inc.'s sale of its Detroit station has run into static because a buyer terminated its offer after entering the contract stage, according to a source close to the matter.
The buyer, a local broadcasting company that had made a verbal offer and reached the contract stage with the Walt Disney Co. (DIS) unit, decided not to pursue Detroit station WFDF and is instead looking to purchase an AM station from CBS Radio Inc., the source said.
Watch the video below for more on Disney's attempt to sell its Detroit radio station:
The buyer is seeking a station with a stronger signal and coverage than what WFDF can provide, the person said, declining to elaborate further.
Radio Disney announced in an internal memo in August that it is divesting 23 of its 24 local radio stations so it can focus on digital broadcasting. The stations up for sale include 22 AM stations and one FM station. Bill Schutz of media brokerage firm Schutz & Co. is leading the sale process for Radio Disney, through which the company is selling its assets individually or in small groups.
The Deal reported in late October that Radio Disney was near a deal to sell its Detroit and Cleveland stations to two different local broadcasting groups, with Detroit fetching a price tag between $2 million to $3.5 million and Cleveland attracting slightly under $1 million. Sources said last month that the discussion for the Detroit station lasted a little more than a week and that negotiations for Cleveland station WWMK took about a month.
Regarding the Detroit station, Robert Heymann, director at Media Services Group Inc.'s Chicago office, said, "It covers the suburban areas better than city limits of Detroit during the day."
But the station's nightime coverage, or the distance its signal covers, is worse than its daytime coverage.
"The name of the game is the ability to cover people," Heymann explained. "You could have the greatest programs in the world, but if it's not listenable, it's not going to get listeners."
The Detroit station will eventually get sold to a local broadcaster but probably for less than the Houston station that Radio Disney agreed to sell, according to Justin Nielson, a senior research analyst at SNL Kagan, a unit of SNL Financial LC.
Radio Disney agreed to sell its Houston station, KMIC, to local Spanish religious broadcaster Daij Media LLC for $3.2 million and made a filing with the Federal Communications Commission seeking regulatory approval on Nov. 4. It was the first divestiture Radio Disney filed with the FCC.
The Houston station's signal covers about 5.2 million people, so that $3.2 million pricetag values each person at 61 cents each. This would value the Detroit station, which covers about 5 million people, at around $3 million, Nielson explained, adding that even the $3 million pricetag could be too high because Detroit isn't a growing market like Houston is.
CBS stations are profitable and offer a better coverage, Nielson added, noting that they "look a lot more attractive from a general revenue opportunity."
He explained that of the Radio Disney stations on the block, the New York, Philadelphia and Dallas stations have the widest population reach and are likely to get the highest value.
Radio Disney is carrying out a difficult deal at a time when AM stations are increasingly going out of favor, said Mike Bergner of media brokerage firm Bergner & Co.
"Getting an AM sold is very difficult," Bergner said. "If they're going to keep doling out these AMs one at a time, this could literally be two or three years before they sell the whole thing."
Still, the radio market has enjoyed fluid M&A levels this year.
Townsquare Media Inc. (TSQ) went public in July and has already sealed two acquisitions. The Greenwich, Conn.-based company acquired country music festival operator We Fest on Nov. 3 and snatched up music publications XXL, King and Antenna from Harris Publications Inc. in September.
CBS Radio and Beasley Broadcast Group Inc. last month agreed to an asset swap, in which the CBS Corp. (CBS) division exchanged 14 stations in Philadelphia, Tampa, Fla. and Charlotte, N.C., for five Beasley stations in Philadelphia and Miami.
Davidson Media Group LLC has also put itself on the block, according to two sources close to the matter who asked to remain anonymous. Davidson officials couldn't be reached Monday. Charlotte-based Davidson Media is a radio station operator that specializes in inspirational and Spanish programming.
In a response to an email seeking comment, a Radio Disney spokeswoman said the information is incorrect but didn't comment further. Schutz declined to comment. A CBS Radio spokeswoman also declined to comment.