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MarketScreener Homepage  >  Equities  >  Nasdaq  >  IHeartMedia Inc    IHRT


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Liberty Media Sets Sights On iHeart -- WSJ

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12/13/2019 | 02:48am EST

By Anne Steele, Brent Kendall and Cara Lombardo

An affiliate of John Malone's Liberty Media Corp. is seeking Justice Department permission to buy a larger piece of iHeartMedia Inc., according to people familiar with the matter, a deal that would put the nation's largest radio broadcaster under the same corporate umbrella as the leading concert promoter and satellite-radio giant SiriusXM.

Liberty owns a 4.8% stake in iHeart through Liberty SiriusXM Group; the deal now under consideration could give it control or outright ownership of the broadcaster, according to people familiar with the matter.

The government is considering the request, the people said, with one of them cautioning that Liberty hasn't decided what kind of transaction, if any, it would proceed with should it receive permission.

Liberty acquired its iHeart stake via debt it took on before the company restructured, which converted to equity when the broadcaster emerged from bankruptcy early this year.

Liberty owns 33% of Live Nation Entertainment Inc., making it the concert giant's largest shareholder, and 71% of satellite-radio company Sirius XM Holdings Inc.

A deal for iHeart would increase its ability to collaborate among those businesses, potentially creating a bulwark against the rising influence of music-streaming companies.

Last year, Liberty orchestrated Sirius's purchase of internet-radio company Pandora Media Inc. -- in which it also held a controlling stake -- for $3 billion, another move intended to compete more effectively against Spotify Technology SA and other on-demand music-streaming services.

Liberty Chief Executive Greg Maffei at an investor day in late November touted the company's increased focus on audio and particularly its exposure to the "exploding" podcast market including through iHeart, the No. 2 publisher by audience, according to Podtrac, a podcast-analytics company.

If Liberty were to gain control of iHeart, it would represent a major consolidation of the avenues by which music and other audio content is distributed, promoted and monetized.

Justice Department antitrust officials recently asked interested parties how they might be affected by a potential deal between a live-entertainment company and a radio company, according to a person familiar with the inquiries, without mentioning Liberty, Live Nation or iHeart by name.

Such a deal has been rumored for some time. Liberty in February of last year made an offer to pump $1.16 billion in cash into iHeart, weeks before it filed for bankruptcy, for a 40% stake in the reorganized company. It withdrew the offer that June because iHeart's results were below expectations, but left the door open for future discussions. The New York Post last December reported Liberty was seeking to assemble a roughly 35% stake in the company postbankruptcy.

A judge in January approved a restructuring plan, wiping more than $10 billion in debt off iHeart's books and turning over control of the company to lenders and bondholders from its longtime owners, private-equity companies Bain Capital and Thomas H. Lee Partners LP. The private-equity firms took iHeart private in a $19.4 billion deal in 2008 when it was known as Clear Channel Communications Inc.

The restructuring plan, which reduced iHeart's debt load to $5.75 billion from $16.1 billion, transferred ownership of the company to a group of lenders and bondholders led by Franklin Advisers Inc.

iHeart's CEO Bob Pittman -- a veteran media executive who previously played integral roles in creating and running MTV and AOL -- and finance chief Rich Bressler remain in their roles.

As part of the restructuring, publicly traded outdoor-advertising unit Clear Channel Outdoor Holdings Inc. was separated from the company. Mr. Pittman said that move would let iHeart focus on its audio business.

iHeart returned to the public markets in July, listing on the Nasdaq. Its market value was just under $1 billion Thursday afternoon but that belies the company's heft.

iHeart, which operates 848 broadcast radio stations in the U.S., also runs a concert-promotion business and has been in the on-demand streaming-music market since 2016, when it launched a pair of services within its existing iHeartRadio app, which had previously just played programming from the broadcast stations. Revenue in the third quarter rose 3% to $948 million.

Sirius offers satellite-radio subscriptions, primarily for listening in cars, but has been expanding into ad-supported streaming media, mainly though its Pandora acquisition, and podcasts. Revenue rose 6% last year to $5.77 billion. It ended the most recent quarter with more than 34.6 million satellite-radio subscribers in the U.S. and Canada, and the company's shares are up over 20% this year.

Pandora, available only in the U.S., after closing operations in Australia and New Zealand in 2017, had 63.1 million monthly active users -- down from 68.8 in the prior-year period -- and 6.3 million subscribers to its premium tier.

Live Nation, the world's largest concert promoter and parent of Ticketmaster, which dominates the ticketing industry, sits at the forefront of a booming live-events business. It ended 2018 with $10.79 billion in revenue, up 11% from the year prior. Its stock price has risen more than 40% so far this year.

The live-events business has been growing rapidly for several years thanks to consumers' seemingly unlimited willingness to pay top dollar for major concerts and festivals. Music-streaming services have contributed to that boom by helping more artists find bigger audiences world-wide.

At the same time, streaming has upended the entire music business. While services like Spotify and Apple Music have resuscitated record labels' fortunes, they have turned music fans onto on-demand listening -- the ability to queue up virtually any song in the world at any time through a monthly subscription -- posing a challenge for radio operators.

Music-streaming and radio companies alike have been investing in podcasts in a bid to better compete in on-demand audio.

Write to Anne Steele at Anne.Steele@wsj.com, Brent Kendall at brent.kendall@wsj.com and Cara Lombardo at cara.lombardo@wsj.com

Stocks mentioned in the article
ChangeLast1st jan.
APPLE INC. 0.02% 324.95 Delayed Quote.10.66%
FORMULA ONE GROUP -0.81% 44.29 Delayed Quote.1.16%
IHEARTMEDIA INC 0.00%End-of-day quote.0.00%
LIBERTY BROADBAND CORPORATION 0.19% 137.07 Delayed Quote.9.00%
LIVE NATION ENTERTAINMENT, INC. 1.19% 74.02 Delayed Quote.3.57%
LONDON BRENT OIL 0.02% 57.26 Delayed Quote.-14.45%
NASDAQ COMP. 0.20% 9731.17573 Delayed Quote.8.40%
SIRIUS XM HOLDINGS INC. -0.28% 7.21 Delayed Quote.0.84%
SPOTIFY TECHNOLOGY S.A. -0.35% 141 Delayed Quote.-5.72%
THE LIBERTY BRAVES GROUP 0.73% 28.81 Delayed Quote.-2.47%
THE LIBERTY SIRIUSXM GROUP -0.02% 49.72 Delayed Quote.3.28%
TRIPADVISOR 0.03% 29.65 Delayed Quote.-2.40%
WTI -0.06% 52.081 Delayed Quote.-16.22%
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Financials (USD)
Sales 2019 3 663 M
EBIT 2019 574 M
Net income 2019 10 708 M
Debt 2019 5 752 M
Yield 2019 -
P/E ratio 2019 0,25x
P/E ratio 2020 10,7x
EV / Sales2019 2,28x
EV / Sales2020 2,06x
Capitalization 2 611 M
Income Statement Evolution
Mean consensus OUTPERFORM
Number of Analysts 9
Average target price 19,30  $
Last Close Price 17,91  $
Spread / Highest target 34,0%
Spread / Average Target 7,76%
Spread / Lowest Target -33,0%
EPS Revisions
Robert W. Pittman Chairman & Chief Executive Officer
Richard J. Bressler President, Chief Operating Officer, CFO & Director
Stephen F. Mills Global Chief Information Officer
James A. Rasulo Lead Independent Director
Gary Barber Director
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