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Tuesday, May 10, 2005

Firm to sell
KHON, KGMB

The move is certain
to reignite opposition
to Emmis' isle duopoly

Honolulu's top-rated television stations, KHON and KGMB, are for sale, along with 14 sister stations from Florida to Oregon.

A LOOK AT EMMIS

Headquarters: Indianapolis
Nasdaq ticker: EMMS

Assets:

» Honolulu TV stations KHON and KGMB
» 25 radio stations and a radio network in eight U.S. markets, including the top three: New York City, Los Angeles and Chicago
» Radio operations in Hungary, Belgium and Slovakia
» Sixteen television stations in 14 U.S. markets
» Six city and regional magazines, including Atlanta Magazine, Los Angeles Magazine and Texas Monthly
» Emmis Books, which publishes titles related to community, humor, faith, food, society, music and personal growth
» Emmis Interactive, which does online marketing and sales

Indiana-based Emmis Communications Corp. was expected to announce today that it has hired an investment banking firm to explore options including an outright sale of its television division, according to an e-mail sent yesterday to station managers from Jeff Smulyan, Emmis chairman, president and chief executive.

Possibilities include an outright sale of all its TV stations, the purchase of a majority interest with continued management by Emmis, and the assembly of an investor group by current Emmis TV Division President Randy Bongarten to purchase the stations.

The upcoming sale poses an opportunity for community groups, long opposed to Emmis' ownership of both Honolulu stations, to speak up again.

Emmis had initially agreed to sell one of the two Honolulu stations but later sought and received a waiver of federal rules prohibiting ownership of two top-rated stations in a single market.

"Obviously those same people would look at the sale of the stations as an opportunity to protest any further continuance of the duopoly," said attorney Chris Conybeare.

Conybeare is a member of several groups that advocate diversity in media ownership, but he is not representing any specific group.

The Honolulu Community-Media Council, the Society of Professional Journalists and the Hawaii State AFL-CIO labor organization have previously expressed concern about media ownership concentration in Honolulu, Conybeare said.

"I'm sure all of us will be sure to be watching and raise the necessary questions as this process moves forward," he said.

Emmis operates a similar two-station duopoly in the Mobile, Ala., and Pensacola, Fla., markets.

Any sale of the Emmis stations requires approval from the Federal Communications Commission.

Smulyan and the board of directors are exploring the sale, as well as a stock buyback of up to $400 million to reduce the company's debt and pursue new opportunities, the e-mail said.

Industry tracking companies have rated Emmis the No. 1 television operator in terms of sales for the past three years, according to a separate e-mail from Bongarten.

The television division is "absolutely profitable. It's had incredible growth," said Rick Blangiardi, Emmis Hawaii market senior vice president and general manager.

Nevertheless, Smulyan believes operators are going to have to be larger in the future in order to be successful. Emmis previously explored the possibility of spinning off its television division into a separate, publicly traded company but did not proceed because the division was too small, Blangiardi said.

Emmis owns stations affiliated with all of the major networks. In Hawaii, KHON is a Fox affiliate, while KGMB is affiliated with CBS.

Any player that comes to make a deal for the whole TV group would have to be a high roller.

Emmis purchased KHON in 1999 and bought KGMB in 2000 as part of a 15-station, $562.5 million deal with Iowa-based Lee Enterprises.

In recent years, Virginia-based media giant Gannett Co. Inc., owner of the Honolulu Advertiser, has made known its desire to buy television stations. However, newspaper companies are barred by federal rules from purchasing television stations in markets where they already operate a daily paper.

In November 2001, following the Sept. 11 terrorist attacks, Emmis instituted a 10 percent companywide pay cut to reduce payroll costs and increase cash flow. Employees whose wages were cut were offered an equivalent award of company stock.

Blangiardi said the new stock buyback offer is unrelated to the earlier awards, but added, "I think with respect to employee stock options, we're waiting for further clarification from Emmis' HR department."

Most of Emmis' Hawaii employees had not seen Smulyan's e-mail by last evening.

Emmis Communications Corp.
www.emmis.com/


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