John Malone’s Liberty Media Corp. is making a play for iHeartMediaInc., offering to pump $1.16 billion in cash into the nation’s largest radio broadcaster in return for 40% stake in the reorganized company following an eventual bankruptcy filing.
A deal between iHeart and Liberty, which owns Sirisu XM, presents the possibility that Mr. Malone could combine the biggest radio broadcaster, scrubbed of billions in debt after bankruptcy, with the leading player in satellite radio.
“This is one of the leading visionaries of the tech and media industry coming and saying I have a plan for this company,” said Lance Vitanza an analyst at Cowen.
News of Liberty’s proposal, disclosed Monday by a group of iHeart lenders and bondholders, comes as a 30-day grace period among the company and its creditors is set to expire. The clock began ticking for iHeartMedia on Feb. 1 after it missed an interest payment to bondholders.
Formerly known as Clear Channel Communications, iHeart has been in talks with its largest creditors for months about restructuring more than $15 billion in debt at the company’s radio business.
The debt is a legacy of a $26.7 billion buyout by private-equity firms Thomas H. Lee and Bain Capital. The 2008 buyout came on the eve of the financial crisis just as markets seized up and advertising rates cratered.
Mr. Vitanza, the analyst, said iHeartMedia’s radio business and Liberty-controlled SiriusXM radio could provide a boost to each other’s offerings. The two companies will no longer have to bid against each other for big name talent such as Rush Limbaugh, Howard Stern or the right air NFL games. Liberty could also promote the subscription-only Sirius offerings on its free broadcast channels, he said.
Despite the potential benefits of the merger, there is no certainty that a merger would survive the often-contentious bargaining sessions played out in bankruptcy court.
“There’s a lot of deal risk still here,” Mr. Vitanza said. “I think some of iHeart’s bondholders understand the potential power of a merger between iHeart and Sirius, but not all creditors understand that.”
A group of iHeart bondholders led by Franklin Advisers unveiled the proposal from Liberty on Monday. A spokeswoman for Liberty Media didn’t return calls seeking comment. An iHeart spokeswoman declined to comment.
Liberty Media has built a position in iHeart’s debt in an effort to gain a foothold in the company’s restructuring, according to Monday’s announcement.
The company’s debt gained a few points on the news, with the company’s 9% priority guarantee notes due 2019, up 3.125 points to 78.375 cents on the dollar, according to MarketAxess. The gains are muted, however, by skepticism over whether the deal ultimately gets done, Mr. Vitanza said.
