June 23, 2011
As Emmis CEO Jeff Smulyan was flying to New York Tuesday morning, Emmis Chief Financial Officer and COO Pat Walsh was driving to Chicago to meet up with Vice President/General Manager Marv Nyren. Smulyan was about to meet with the staff at WRXP in New York. Nyren was gathering the employees of WKQX-FM (Q-101) and WLUP-FM (The Loop) for a mandatory staff meeting with Walsh. Two staff meetings later and 3 Emmis stations were gone. The buyer, pending regulatory approval, is Merlin Media. An interesting name for sure and no doubt there's a story behind it with Randy Michaels as its Chairman and CEO.
Most of the focus yesterday was in Chicago, even though New York City is the number one market in America. A lot of that had to do with the fact that Smulyan was openly shopping around the Chicago market. For a while now, he's been willing to move the two stations for the right price. Perhaps New York became part of the deal because more money was needed as part of Emmis' desire and need to pay down debt. Smulyan says selling these three stations puts Emmis in a much more favorable financial position. Back in January, Emmis attorney's wrote in a regulatory filing: "Absent asset sales, which the company is actively pursuing, the company believes it is unlikely it will be able to maintain compliance with the financial covenants after Sept. 1, 2011. Failure to comply would put Emmis in default on its $345 million of senior bank debt, causing it to come due more rapidly." Emmis will receive between $110 and $130 million dollars for the three stations and retain a small stake in the company.
The deal ends months of speculation and the unknown for the 70 employees at Q-101 and the Loop. According to Smulyan he'd been talking to Michaels about a deal for quite some time. It started to come together in the past few months and only two people at the Chicago stations knew what was going on until today. Nyren says it was amazing that only two people knew but it enabled everyone to stay focused and hit their sales budgets in May.
Randy Michaels was not at the Chicago radio stations when the staff was told about the sale. However, after the
meeting, John Gehron did pop in for a tour of the facility. Gehron is listed as Chairman, Advisory Board, responsible for building a strategic and robust relationship with key business partners in Chicago. It's unclear what that means for the two Chicago stations but it looks really important on a press release. Speculation is now starting to swirl around what happens to the formats, both in New York and Chicago. A lot of talk about some sort of flip to news/talk. CBS's newsradio WBBM may have something to say about that battle if it ever happens.
There's also been speculation that consultant Walter Sabo will be part of a team if there is to be a transition to some sort of news/talk format. Sabo did not respond to an e-mail we sent him today, which is unusual for Sabo so that lends to even more speculation of course. Sabo specializes in talk on the FM band for a younger demo. Even Nyren said today "an FM News or Talk station in this market could be successful. Younger demo's listen to FM radio."
Michaels has not made any public statements yet, other than what was issued in the press release. it was nearly nine years ago when Michaels left Clear Channel as CEO of the radio division. We went back to an interview we did with Michales on
September 9, 2001. "I was the architect of the largest radio group in the world, and I?m ready to move on to the next. Everyone has to decide how they?re going to play this, but to steal a phrase from the new CEO of Procter and Gamble, ?Change is inevitable?lead it.? Everyone on a personal level needs to adopt that attitude. Change in this business in particular is inevitable, and it?s going to occur more quickly than in any business I can think of. You have two choices: you can either fight it or you can lead it. And I think the intelligent choice is obvious."
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