EVC - Entravision Communications Corporation (EVC) - Not Expected To Be A Swan Song
Accelerates timetable to buy the rest of Cisneros. The Company acquired the remaining 49% interest in Cisneros Interactive that it did not already own, accelerating the timetable to buy the stake by 2 years. Notably, we estimate that the company paid $29 million for its original 51% ownership interest in Oct. 2020. The purchase solidifies the company as a leading digital media company, with over 70% of its consolidated revenue from its Digital Media businesses.Attractive terms. Entravision will pay the remaining shareholders of Cisneros in 1/3rd increments in each of the next 3 years. The annual payout will be 6 times EBITDA of the prior year end period times 49% divided by 3, an attractive valuation given the strong growth profile of Cisneros. The sellers will receive incremental upside from acquisitions that Cisneros makes.Estimates to be adjusted higher. The company will own 100% of Cisneros as of today. As such, the company will have two months of Cisneros at 51% and one month at 100%, increasing EBITDA by roughly $800,000 in Q3. In Q4, the company will own 100% of Cisneros for the full quarter, adding about $3 million in Q4 EBITDA. Minority interest in both quarters will be adjusted downward. We are reviewing our full year 2021 and 2022 estimates, which will likely be raised. Financially capable for additional acquisitions. As of June 30, the company had $182.5 million in cash, cash equivalents, marketable securities and restricted cash and has the financial means to complete the transaction. We view the transaction favorably, which is accretive to our EBITDA estimates. The company has significant financial capability to seek additional acquisitions and/or to repurchase shares.Stock valuation multiple should expand. We believe that the company's transformation toward a Digital Media company should carry higher multiples than its traditional media businesses. Our $10 price target is under review based on the incremental cash flow from the recent purchase and on the prospect of higher valuation multiple. Read More >>