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Could Liberty Acquire iHeart After All?

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You might remember in the days leading up to iHeart’s bankruptcy, Liberty Media made a hail Mary $1.16B cash offer in return for a 40% stake in the beleaguered broadcaster.  This would have put iHeart’s valuation at $2.9B, which was too low of a price for iHeart’s creditors to accept, so they passed.  But fast forward five months and there may be new life in a potential deal.

NASDAQ.com (yes, I went pretty deep for this one), has a fascinating analysis of iHeart’s current financial position and the way Liberty could make a deal happen.  One potential path is for SiriusXM, which is owned by Liberty, to up the bid by $500M to roughly $1.7B for the same 40%.  This cash infusion would help iHeart’s senior debt holders recover about 80% of what they invested, which is a much better outcome for them than any other current scenario.

One of the keys to making this deal happen is for Sirius-iHeart to be run as one entity, because Liberty would be counting on $500M in annual in savings from operational synergies.  iHeart’s current total business expenses are about $2.5B – so they’d need to trim 20% from their operating budget.  (Look out iHeart HQ mist tunnel . . . your days could be numbered!)  What’s not clear is how Sirius will impose $500M in cost savings if they only control 40% of the company.  But I’m sure some brighter business minds than me are hard at work on that question as we speak.

 

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