HITS Daily Double


Estimated $3 Billion in Holdings Include Stations, ABC News, ESPN, Radio Disney; Company Reportedly Has Plan with Fancy Name
The Walt Disney Company is considering spinning off its estimated $3 billion in radio stations and network assets and merging them with another radio company, the Wall Street Journal reports.

Disney has debated whether to keep its radio operations for years, but with the Michael Eisner on his way out and Robert Iger on his way in at the top of the company, some think action on this front could now be forthcoming.

Disney’s 71 radio stations (many in the Top 25 markets) and network, which reaches 4,500 affiliates and includes ABC News Radio, ESPN Sports Radio and Radio Disney, are said to generate around $700 million in annual revenue. But some Disney execs reportedly feel that owning radio at a time when the radio industry as a whole is faring poorly could hurt the company’s growth due to negative investor perception. If Disney were to spin off its radio assets, the theory goes, investors might view the company more favorably, which could buoy its stock price.

If Disney chooses to proceed with the spinoff, the Journal Reports, it will likely do so using a multi-step plan known as a “reverse Morris Trust” (we’ll just have to trust them on that). In this plan, Disney would first increase the radio unit’s debt load in order to extract cash. Then the company would spin off and merge it with another radio company of like size so that Disney shareholders end up with at least 50% of the new company’s combined equity. The arrangement would keep taxes to a minimum (again, we’ll just have to trust them on that).

Those companies likely in the running to be Disney’s radio mate (based on size, which is apparently critical to pulling off the whole reverse-Morris thing) are said to be Cox, Citadel, Entercom and Emmis.

According to the Journal, analysts value Disney’s stations at $1.5 to $1.75 billion, and the network at $1.25 to $1.5 billion.