Lincoln National Divests Financial Media Arm to Entercom
Lincoln National Corp. (LNC) has inked a deal with Entercom Communications Corp. (ETM) to dissociate from its North Carolina-based wholly-owned financial media business – Lincoln Financial Media (:LFM).
Valued at $105 million, the transaction is expected to culminate by June 2015 upon receipt of regulatory approvals. LFM had been a part of Lincoln National’s acquisition of Jefferson-Pilot Corp. for $8 billion in 2006.
Per the agreement, Lincoln National will sell the remaining 15 radio stations in Atlanta, Denver, Miami and San Diego, all of which comprise the LFM unit. Meanwhile, Entercom will divest one of the radio FM station in Denver to conform to the regulations of the Federal Communications Commission (:FCC).
Furthermore, this $105 million deal constitutes a cash payment of $77.5 million and new perpetual cumulative convertible preferred stock worth $27.5 million, which will not be encompassed under the debt profile. While the acquisition is expected to be accretive to Entercom from 2015, it is also not expected to raise debt concerns as the company primarily plans to utilize its revolver credit facility worth $50 million along with available cash for funding the deal.
Deal Evaluation
The acquisition complements the business strategies of both the parties in concern. On the one hand, the divestment will add flexibility to Lincoln National’s capital and cash flow, and help focus on its core life and retirement insurance operations. Previously in 2008, Lincoln National had divested three radio and three television stations in North Carolina, South Carolina and Virginia for about $646 million to Raycom Holdings and Greater Media.
On the other hand, the acquisition of LFM will add another feather to Entercom’s cap, which is already the principal radio broadcasting company in the U.S. with over 100 stations in 23 markets. The purchase of LFM will further expand Entercom’s presence to 130 stations in over 26 markets, while the superior brand recognition will add to the enterprise value.
These positives will ultimately boost Entercom’s competitive edge across the major markets of Denver and aid penetration into the markets of Atlanta, Miami and San Diego. Moreover, LFM is anticipated to be a financially prudent deal given the projection of future tax savings as well as accretion in earnings and free cash flow. Hence, we believe the deal to be a progressive for both the companies.
Currently, Lincoln National carries a Zacks Rank #2 (Buy). Equally well-ranked peers like Protective Life Corp. (PL) and StanCorp Financial Group Inc. (SFG) are also worth a look.
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