v3.26.1
BUSINESS COMBINATIONS
 12 Months Ended
Dec. 31, 2025
Business Combination, Asset Acquisition, Transaction between Entities under Common Control, and Joint Venture Formation [Abstract]  
BUSINESS COMBINATIONS
3. BUSINESS COMBINATIONS
The Company accounts for acquisitions in accordance with guidance found in ASC 805, Business Combinations. The guidance requires consideration given, including contingent consideration, assets acquired, and liabilities assumed to be valued at their fair values at the acquisition date. The guidance further provides that: (1) acquisition costs will generally be expensed as incurred, (2) restructuring costs associated with a business combination will generally be expensed subsequent to the acquisition date; and (3) changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition date generally will affect income tax expense. ASC 805 requires that any excess of purchase price over fair value of assets acquired, including identifiable intangibles and liabilities assumed, be recognized as goodwill.
Estrella Acquisition
On April 17, 2024, MediaCo consummated the Estrella Acquisition, pursuant to which it purchased substantially all of the assets of Estrella, other than the Estrella Broadcast Assets, and assumed substantially all of the liabilities of Estrella and its subsidiaries. MediaCo provided the following consideration for the Estrella Acquisition (the “Transaction Consideration”):
aA warrant (the “Warrant”) to purchase up to 28,206,152 shares of MediaCo’s Class A common stock;
b60,000 shares of a newly designated series of MediaCo’s preferred stock designated as “Series B Preferred Stock” (the “Series B Preferred Stock”),
cA term loan in the principal amount of $30.0 million under the Second Lien Credit Agreement (as defined below) (the “Second Lien Term Loan”); and
dAn aggregate cash payment in the amount of approximately $25.5 million to be used, in part, for the repayment of certain indebtedness of Estrella and payment of certain Estrella transaction expenses, financed through the First Lien Credit Agreement (as defined below).
Option Agreement
On April 17, 2024, in connection with the Estrella Acquisition, MediaCo and Estrella entered into an Option Agreement (the “Option Agreement” and, collectively with the Estrella Acquisition and the transactions contemplated by the Network Affiliation Agreement and the Network Program Supply Agreement described below, the “Estrella Transactions”) with Estrella and certain subsidiaries of Estrella pursuant to which (i) MediaCo was granted the option to purchase 100% of the equity interests of certain subsidiaries of Estrella holding the Estrella Broadcast Assets (the “Option Subsidiaries Equity”) in exchange for 7,051,538 shares of Class A common stock, and (ii) Estrella was granted the right to put the Option Subsidiaries Equity to MediaCo for the same consideration during a period beginning six months after the date of the closing of the Estrella Transactions (the “Closing Date”) and ending after seven years, which will automatically extend for a renewal term of seven years unless both parties mutually agree otherwise.
On May 1, 2025, the Put Right was exercised by Estrella Media, Inc. and MediaCo acquired 100% of the equity interests of Estrella and certain subsidiaries of Estrella in exchange for 7,051,538 shares of Class A common stock.
Voting and Support Agreement
The Asset Purchase Agreement provides that MediaCo would hold a special meeting of MediaCo shareholders (the “Shareholders Meeting”) to consider approval of the issuance of shares of Class A common stock upon exercise of the Warrant and the issuance of shares of Class A common stock pursuant to the Option Agreement (the “Proposal”).
On April 17, 2024, in connection with the Estrella Acquisition, SG Broadcasting, the holder of shares of Class A common stock and Class B common stock, par value $0.01 per share (“Class B common stock”) representing a majority of the voting power of the shares of MediaCo, entered into a Voting and Support Agreement with MediaCo and Estrella (the “Voting and Support Agreement”), pursuant to which SG Broadcasting agreed to, among other things, and subject to the terms and conditions set forth therein, at any meeting of MediaCo shareholders (including the Shareholders Meeting), or at any adjournment or postponement thereof, vote in favor of the Proposal and against any action or proposal that would reasonably be expected to prevent or materially delay consummation of the Proposal. The Voting Agreement also includes certain customary restrictions on SG Broadcasting’s ability to transfer its shares of MediaCo stock. The Voting Agreement will automatically terminate upon the date on which the Proposal is approved.
Warrant
In connection with the Estrella Acquisition, MediaCo issued a warrant which provides for the purchase of up to 28,206,152 shares of Class A common stock, subject to customary adjustments as set forth in the Warrant, at an exercise price per share of $0.00001. See Note 7 — Long-Term Debt, Warrants, And Series B Preferred Stock for further discussion.
On September 8, 2025 the warrant issued in connection with the Company’s acquisition of certain assets of Estrella and its subsidiaries was exercised in exchange for 28,205,938 shares of MediaCo Class A Common Stock, par value $0.01 per share.
First Lien Term Loan
In order to finance the Estrella Acquisition, MediaCo, as borrower and guarantor, and its direct and indirect subsidiaries, as guarantors, entered into a $45.0 million first lien term loan credit facility with White Hawk Capital Partners, LP, as administrative and collateral agent, and various lenders. See Note 7 — Long-Term Debt, Warrants, And Series B Preferred Stock for further discussion.
Second Lien Term Loan
In connection with the consummation of the Estrella Acquisition, MediaCo as borrower and guarantor, and its direct and indirect subsidiaries, as guarantors, entered into a $30.0 million second lien term loan credit facility with HPS Investment Partners, LLC, as administrative and collateral agent, and various financial institutions. The Second Lien Credit Agreement was recorded at is fair value of $26.5 million. See Note 7 — Long-Term Debt, Warrants, And Series B Preferred Stock for further discussion.
Series B Preferred Stock
On April 17, 2024, MediaCo issued 60,000 shares of Series B Preferred Stock with an aggregate initial liquidation value of $60.0 million, recorded at its issuance date fair value of $32.0 million, which will be accreted up to the redemption value over the term. See Note 7 — Long-Term Debt, Warrants, And Series B Preferred Stock for further discussion.
Network Affiliation and Supply Agreements
On April 17, 2024, in connection with the Estrella Acquisition, MediaCo entered into a Network Program Supply Agreement (the “Network Program Supply Agreement”) with certain subsidiaries of Estrella that operate radio broadcast stations (the “Radio Stations”). Pursuant to the Network Program Supply Agreement, MediaCo has agreed to license certain programs and other material to the Radio Stations for distribution on the Radio Stations’ broadcast channels. The Network Program Supply Agreement terminated upon the exercise of the Put Right on May 1, 2025.
On April 17, 2024, in connection with the Estrella Acquisition, MediaCo entered into a Network Affiliation Agreement (the “Network Affiliation Agreement”) with certain subsidiaries of Estrella that operate television broadcast stations (the “TV Stations”). Pursuant to the Network Affiliation Agreement, MediaCo has agreed to license certain programs and other material to the TV Stations for distribution on the TV Stations’ broadcast channels. The Network Affiliation Agreement terminated upon the exercise of the Put Right on May 1, 2025.
Purchase Price Allocation
On April 17, 2024, the Company completed the Estrella Acquisition, accounted for under the acquisition method of accounting in accordance with ASC 805. The Company finalized its assessment of the fair values of the assets acquired and liabilities assumed during the measurement period, with adjustments recorded as of December 31, 2024. In accordance with ASC 805-10-25-13, the Company recognized measurement period adjustments to the provisional amounts initially recorded. These measurement period adjustments included changes to the valuation of acquired assets which primarily consisted of a $9.5 million decrease in the fair value of the Estrella Acquisition’s FCC licenses, a $5.6 million decrease in favorable leasehold interests, and a $1.9 million decrease in the Estrella Acquisition’s intangible assets related to customer relationships. These decreases were partially offset by a $1.9 million increase in property and equipment and a $1.1 million increase in other assumed liabilities. Additionally the Company made certain reclassifications of amounts within this disclosure to conform to the year-end presentation in the consolidated balance sheet. In the aggregate, we recorded a net increase of $13.5 million to goodwill for these measurement period adjustments to reflect the final determination of assets acquired and liabilities assumed as shown below. Additionally, the Company recognized additional depreciation and amortization expense of $0.7 million resulting from revised fair values of fixed assets and intangible assets. The Company also recognized $0.6 million less of operating expense related to adjustments to the Company’s leases. These adjustments are reflected in the Company’s consolidated statement of operations for the year ended December 31, 2024.
The following tables summarize the fair value of cash and noncash consideration transferred, assets acquired, and liabilities assumed as of the acquisition date:
Valuation as of
April 17, 2024
Cash Consideration$25,499 
Noncash Consideration:
Warrants(1)
70,515 
Series B Preferred Stock(2)
31,975 
Second Lien Term Loan(2)
26,534 
Total Noncash Consideration129,024 
Total Consideration$154,523 
(1)    Represents the fair value of warrants to purchase 28,206,152 shares of Class A common stock issued in the Estrella Transactions valued at the closing price on the day prior to close of $2.50.
(2)    Represents the fair value of the Series B Preferred Stock and Second Lien Term Loan using a required yield of 15.23% and 14.14%, respectively.
Valuation as of
April 17, 2024
Cash and cash equivalents$12,484 
Accounts receivable, net of allowance for credit losses of $292
16,330 
Prepaid expenses and other current assets2,962 
Current programming rights3,445 
Property and equipment, net19,826 
Intangible assets, net116,658 
Right of use assets38,632 
Goodwill28,338 
Noncurrent programming rights6,852 
Deposits and other690 
Assets acquired$246,217 
Accounts payable and accrued expenses$25,254 
Deferred revenue9,543 
Operating lease liabilities27,938 
Finance lease liabilities3,029 
Other Liabilities8,301 
Liabilities assumed$74,065 
Fair value of noncontrolling interests (1)
17,629 
Net assets acquired$154,523 
(1) Fair value of noncontrolling interests based on 7,051,538 shares issued in Option Agreement valued at the closing price on the day prior to close of $2.50.
Property and equipment is primarily composed of broadcasting equipment and leasehold improvements. Acquired property and equipment will be depreciated on a straight-line basis over the respective estimated remaining useful lives.
The amount allocated to definite-lived intangible assets represents the estimated fair values of customer relationships of $13.7 million and will be amortized over the estimated remaining useful lives of fifteen years.
The amount allocated to indefinite-lived intangible assets represents the estimated fair values of the FCC licenses of $102.7 million and goodwill of $28.3 million. Goodwill, which is derived from the expanded client base and our ability to provide broader advertising solutions through a comprehensive portfolio, is recorded based on the amount by which the purchase price exceeds the fair value of the net assets acquired and we expect it will be deductible for tax purposes. Goodwill of $8.4 million and $19.9 million from this transaction is allocated to our Video Segment and Audio Segment, respectively.
As part of the acquisition, we incurred costs of $9.0 million for the year ended December 31, 2024, primarily related to transaction bonuses and professional services, which are included in the operating expenses excluding depreciation and amortization and corporate expense line items in the consolidated statement of operations. Additionally, there were $1.8 million of deferred financing costs and $1.1 million of original issue discount related to the issuance of the First Lien Credit Agreement included in long term debt, net of current on the consolidated balance sheet.
The Company recorded Revenues of $67.3 million and Net loss of $16.0 million for the year ended December 31, 2024 related to the Estrella Acquisition.
Variable Interest Entity
As discussed in Note 1, the Company determined that the Estrella entities holding the Estrella Broadcast Assets represented a VIE in which the Company holds a controlling financial interest, as MediaCo is the primary beneficiary of the VIE. Effective May 1, 2025, the Estrella VIE was fully consolidated into MediaCo. Estrella VIE’s assets can be used only to settle obligations of the Estrella VIE. The carrying amounts of the VIE’s consolidated assets and liabilities included in the consolidated balance sheet are as follows:
December 31,
2024
Cash and cash equivalents$159 
Accounts receivable, net of allowance for doubtful accounts of $42
2,858 
Prepaid expenses351 
Other current assets28 
Total current assets3,396 
Property and equipment, net10,298 
Other intangible assets, net102,698 
Other assets:
Operating lease right of use assets3,171 
Deposits and other579 
Total other assets3,750 
Total assets$120,142 
Current liabilities:
Accounts payable and accrued expenses$3,072 
Deferred revenue53 
Operating lease liabilities370 
Income taxes payable2,025 
Other current liabilities49 
Total current liabilities5,569 
Operating lease liabilities, net of current2,427 
Other noncurrent liabilities6 
Total liabilities$8,002 
Net assets$112,140 
The summarized operating results of the VIE are as follows:
Year ended December 31,
20252024
Net revenues$2,654 $9,785 
Operating Income$474 $2,768 
Net income$475 $2,773 
Unaudited Pro Forma Financial Information
The following table presents the estimated unaudited pro forma combined results of MediaCo and Estrella for the year ended December 31, 2024 as if the acquisition had occurred on January 1, 2023:
Year ended December 31,
2024
Net revenues$117,307 
Loss before income taxes$(14,371)
The supplemental pro forma financial information has been prepared using the acquisition method of accounting and is based on the historical financial information of MediaCo and Estrella. The supplemental pro forma financial information does not necessarily represent what the combined companies’ revenue or results of operations would have been had the Estrella Acquisition been completed on January 1, 2023, nor is it intended to be a projection of future operating results of the combined company. It also does not reflect any operating efficiencies or potential cost savings that might be achieved from synergies of combining MediaCo and Estrella.
The unaudited supplemental pro forma financial information reflects primarily pro forma adjustments related to fair value estimates for intangibles, property and equipment, debt, preferred stock, interest expense and amortization of deferred financing costs for the debt and preferred stock issuances to finance the Estrella Acquisition. The unaudited supplemental pro forma financial information includes transaction charges associated with the Estrella Acquisition. There are no material, nonrecurring pro forma adjustments directly attributable to the Estrella Acquisition included in the reported pro forma revenue and loss before income taxes.