All about the cash: Why the Laundys bought Nine Radio
“This is a bet that the market has priced talk radio like it is dying fast, while the cashflow suggests it will die slowly.”
Mutinex co-founder Henry Innis begins a regular series of columns for Mumbrella with an incisive look at the economics of the Nine Radio sale.
The author Henry Innis
When Nine announced the sale of its radio network to the Laundy family on Friday, I must have read about 50 headlines describing the move as “surprising” and “linked to politics”.
But I think the story is more economic in nature: someone has spotted a cashflow stream that looks mispriced, and they are backing themselves to run it with fewer distractions.
Nine is selling 2GB, 3AW, 4BC, 6PR, 2UE, Magic1278 and 4BH to the Laundy Family Office for a cash and debt free enterprise value of $56 million. The same day, Nine also made a $850m bet on outdoor via QMS. Nine is reshaping its portfolio towards growth. But the Laundys are doing something simpler: buying a cash stream.
In this case, the price matters more than the medium
While Nine’s documentation says it expected radio to contribute $6m EBITDA in 2026, in past reports the number has been reported far higher. Reading between the lines, there could be some variance in the costs that make the EBITDA number more attractive to a private buyer.
Its all about the trying to protect the pokkies henry
Pubs and clubs in Australia are basically (with a few exceptions) bankrolled by gambling. Which fits perfectly with 2GB cause they are fuelled by gambling as well. And it makes sense as Australians are global leaders in per capita gambling losses. That’s right – we lose more on gambling per annum than any other population on earth. But we do it oh so discreetly. Not large casinos. But in all pubs and clubs throughout the country. And of course, online sports betting. It’s invisible but HUGE. It’s the invisible force behind ‘hospitality’. Anyone with a pub empire has built it on gambling cause food and beverage alone will send you broke.
That seems like a very logical and well-balanced and framed financial argument for the case to purchase.
Like most media plays, the execution of this hypothetical will need plenty of energy, commitment and expertise, which the buyers in their primary interest of hospitality appear to have in spades, plus maybe a little help from their friends. Well done to them.
Another opportunity exists in the commercial radio market yet to swap hands, and while less able at this point to submit to such a crisp financial analysis to support its case as the Nine Radio example, I would suggest offers very substantial potential for excellent returns for an equally energetic and committed buyer with media expertise.
And he’s the rub, the capital outlay is a fraction of the Nine deal, however a buyer may structure it.
If you’re interested in hearing more about this, give me a call on 0408 699 816. You may be surprised.