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BROADCASTING Turned off by Emmis TV Investors get jitters after Lee TV acquisition; Smulyan now mulls a tracking stock

By Elizabeth A. Rathbun said. A tracking stock creates a sepa- Indeed, there is a "generally negative rate market valuation for a parent com- view toward TV stations unless they With the TV industry in distress, pany's business unit, while the parent are major -market stations with greater Emmis Communications plans continues to control the assets of the franchise value and market clout for to spin off its newly enlarged business (and the revenue). A decision national advertisers," which Lee's are TV group, probably into a tracking is expected within 120 days. not, analysts Edward Hatch and Peter stock, says Chairman Jeffrey Smulyan. That the TV business isn't the best Mirsky of SG Cowen wrote last Mon- On May 8, Emmis more than doubled investment these days was under- day. Spinning off the TV stations is a the size of its TV holdings, paying scored by Wall Street's reaction to good idea "as investors do not seem to $562.5 million for eight Big Three affil- Emmis' news: The -based want to own `hybrid' companies," iates and seven satellite stations owned company's stock price dove 23.1 %, to added the analysts, who lowered their by . Lee will sell its close last Monday at $33.50 per share. Emmis price target from $58 to $49. Telemundo affiliate KMAz(Tv) El Paso to It continued to tumble Tuesday, when Wall Street was caught off guard by someone else, which will put the news- it dropped another 10.3%. It closed at Emmis' TV deal, which was reported paper publisher out of the TV business. $29 last Wednesday, down 3.5% from to be in the works in the May 1 edition "We see value in television; we Tuesday's close and close to its 52- of BROADCASTING & CABLE. Tradition- understand that others may be con- week low of $27.25 on March 7. ally slow -to- acquire, Emmis consis- cerned," Smulyan said last tently has proclaimed itself a Monday during a conference radio company and has been call. "Television ... is lower promising to spend $1 bil- than it's ever been, and Adding up Emmis lion over the course of the there's good reason for that" With the purchase of eight stations from Lee Enterprises, Emmis Com- year to buy radio stations. Among those concerned is munications more than doubles its TV holdings. The chart below shows Emmis is "in the very final Emmis investor Liberty how smoothly Lee's stations slide into Emmis' existing lineup (Lee sta- stages of [making] several" Media, which, after tions are marked with an asterisk): radio deals, Smulyan said. Smulyan, is Emmis' largest Smulyan also has been shareholder. "Liberty was DMA Market Station Affil. Channel promising to announce an one of the people who sug- 22 Orlando, Fla. WKCF(TV) WB 18 Internet portal partnership gested so strongly that we since last fall (B &C, Sept. 6). 23 Portland, Ore. KOIN(TV)* CBS have two different operating The Lee deal works out to entities," one for TV stations 41 WVUE(TV) Fox 8 about 14 times current broad- and the other for the booming Albuquerque, N.M.' KROE(TV)* CBS 13 cast cash flow, but is accre- radio stations, Smulyan said. 59 Huntington /Charleston, W.Va. wsaz-Tv* NBC 3 tive, giving Emmis TV In what appears to be an 62 Mobile, Ala. /Pensacola, Fla. WALA-TV Fox 10 enough "critical mass to be

effort to protect the value of 65 Wichita, Kan.' KSNW(TV)* NBC 3 put into a separate entity." By Emmis' more profitable port- 69 Green Bay, Wis. WLUK-TV Fox 11 adding Lee's stations to its folio of 15 radio stations, seven, mostly Fox, network 71 ' KGMB(TV)* Smulyan said he is consider- CBS 9 affiliates, Emmis nearly dou- ing taking Emmis' TV hold- 71 Honolulu KHON-TV Fox 2 bles its reach to 6.84% of TV ings private or trading them 72 Tucson, Ariz. KGUN(TV)* ABC 9 households. Under the FCC's as a tracking stock. He added 73 Omaha, Neb. KMTV(TV)* CBS 3 method of accounting, which that he might put more of his 81 Fort Myers, Fla. WFTx(TV) Fox 36 discounts 50% for UHF sta- own money into the TV side. 138 Topeka, Kan. KSNT(TV)* NBC 27 tions, a combined Emmis/Lee "The private value of televi- reaches 6.04% TV house- 139 Terre Haute, Ind. WTHI-TV CBS 10 of sion operations is higher than holds, compared with the the public value. That will be "= stations being bought from Lee Emmis -only percentage of reversed" as investors realize 2.74. Those percentages Emmis also owns the following radio stations: KPwR(FM) ; WKOx(FM) the value that digital spec- ; WIBC(AM), WNAP-FM and WTLC-AM-FM Indianapolis, WENs(FM) Shelbyville /Indi- account for the fact that trum will provide, Smulyan anapolis and WTHI -AM -FM and wwve(FM) Terre Haute, Ind.; KSHE(FM), WKKx(FM) and Emmis will have to sell either predicted. Meanwhile, "the WXTM(FM) St. Louis; and WOCD(FM), WOHT(FM) and WRKS -FM New York. its or Lee's station in Honolu-

radio business is on fire." (and satellites KREZ -TV* Durango, Colo./Farmington, N.M., and KBIM -Tv* lu because of the FCC's duop- Liberty, itself a tracking Roswell, N.M.) oly rules. stock of AT &T, comes down (and satellites KsNG(TV)* Garden City and KsNc(rv)* Great Bend, Kan., The deal is subject to FCC and KSNK(iv)* McCook, Neb.) a on the side of creating (and satellites KGMO -TV Hilo and KGMV(TV) Wailuku, Hawaii) and Justice Department tracking stock, Smulyan approval.

38 BROADCASTING & CABLE / MAY 15, 2000