Private eyes good for rise in Cox Radio


NEW YORK -- Shares of Cox Radio Inc. rose 8.3% on Thursday as two analysts upgraded the stock and suggested parent company Cox Enterprises might be more likely to take the radio group private given recent weakness in its stock, among other factors.

Credit Suisse analyst John Klim upgraded his rating on the stock from "sell" to "underperform" citing valuation. He maintained his $14 target price on Cox Radio shares.

"The stock's pullback over the past four months has brought Cox Radio's valuation in line with the radio group," he argued in his report.

"We do not believe Cox Enterprises Inc. will buy-in the 36% of Cox Radio that it does not already own over the next 12 to 18 months," Klim said. "In our opinion, Cox Radio's valuation is not compelling enough (at least at these levels)."

However, he added that Cox Enterprises' balance sheet "is about to become much healthier with a large cash payment on the way" based on a recent agreement by Cox to sell its 25% stake in Discovery Communications for $1.3 billion in cash, the Travel Channel and Antenna Audio.

Bear Stearns analyst Victor Miller in a report Thursday more broadly suggested that 2007 could turn out to be "the year of the buyout" for radio stocks because of a combination of "one, poor stock performance since Jan. 1, 2005, (average stock down 35%); two, declining implied take-out multiples for radio; three, decreasing company floats; and four, the increased presence of private equity."

Miller also upgraded Cox Radio shares, in his case to "outperform" with a $16 target price and a possible $18.75 take-out value. He cited the company's "comparatively attractive multiple, relatively well-positioned business, strong balance sheet, conservative acquisition strategy and other developments," mainly the Discovery deal, past stock buybacks and Cox Radio's adoption of a defined benefits program.

As far as additional radio groups are concerned, they could be tempted to go private as sector stock prices are down 9% since January-February and down 35% on average since Jan. 1, 2005, Miller said.

Stock buybacks also have decreased the number of outstanding shares for many radio firms, plus buyout prices seem to have come down, especially given what many consider a low take-out price offered for sector giant Clear Channel Communications, he said.

Cox Radio shares rose $1.14 on Thursday to $14.89. They have traded from $12.60-$17.48 during the past 52 weeks.

Clear Channel shares finished up 0.4% at $35.68, while Emmis Communications saw its stock gain 2.1% to $9.08. Cumulus Media shares rose 4.3% to $9.86. The markets were closed for the holiday Friday.