BUSINESS COMBINATIONS

6 Months Ended

Jun. 30, 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 our Class A common stock (the “Warrant Shares”);

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 March 6, 2025, the Company held the Shareholders Meeting, at which the Company’s shareholders voted to approve the issuance of (i) up to 28,206,152 shares of Class A common stock upon the exercise of the Warrant and (ii) 7,051,538 shares of Class A common stock upon the exercise of the option right held by a subsidiary of MediaCo to purchase, or the put right held by Estrella Media, Inc. to sell to such subsidiary, equity interests of certain broadcast assets.

On April 17, 2024, in connection with the Estrella Acquisition, SG Broadcasting LLC (“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 and Support Agreement also includes certain customary restrictions on SG Broadcasting’s ability to transfer its shares of MediaCo stock. The Voting and Support Agreement automatically terminated on March 6, 2025 when the Proposal was approved.

Warrant

In connection with the Estrella Acquisition, MediaCo issued the Warrant. See Note 6 — Long-Term Debt, Warrants, and Series B Preferred Stock for further discussion.

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 6 — 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 its fair value of $26.5 million. See Note 6 — 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 6 — 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.

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.

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. During the measurement period, the Company identified adjustments to the provisional amounts initially recorded for the fair values of assets acquired and liabilities assumed. These adjustments were made in accordance with the guidance on measurement period adjustments in ASC 805-10-25-13. 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, the Company 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.

The accounting for the Estrella Acquisition was completed as of 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 Consideration						129,024
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 and Allocation as of April 17, 2024
Cash and cash equivalents						12,484
Accounts receivable, net of allowance for doubtful accounts of $292						16,330
Prepaid expenses and other current assets						2,962
Current programming rights						3,445

Property and equipment, net						19,826
Intangible assets, net						116,658
Right of use assets						38,632
Goodwill						28,338
Noncurrent programming rights						6,852
Deposits and other						690
Assets acquired						246,217

Accounts payable and accrued expenses						25,254

Deferred revenue						9,543
Operating lease liabilities						27,938
Finance lease liabilities						3,029




Other Liabilities						8,301

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 of Class A common stock exercisable pursuant to the 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 15 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.

Variable Interest Entity

As discussed in Note 1 — Summary of Significant Accounting Policies, the Company determined that the Estrella entities holding the Estrella Broadcast Assets represented a VIE in which the Company held a controlling financial interest, as MediaCo was the primary beneficiary of the VIE. Estrella VIE’s assets could have been used only to settle obligations of the Estrella VIE until May 1, 2025 when 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. The carrying amounts of the VIE’s consolidated assets and liabilities included in the condensed consolidated balance sheet are as follows:


	December 31, 2024
CURRENT ASSETS:
Cash and cash equivalents	$	159

Accounts receivable, net of allowance for doubtful accounts of $42	2,858
Prepaid expenses and other current assets	379

Total current assets	3,396
PROPERTY AND EQUIPMENT, NET	10,298
OTHER INTANGIBLE ASSETS, NET	102,698
OPERATING LEASE RIGHT OF USE ASSETS	3,171

DEPOSITS AND OTHER	579

Total assets	$	120,142
CURRENT LIABILITIES:
Accounts payable and accrued expenses	$	3,072


Deferred revenue	53
Operating lease liabilities	370

Income taxes payable	2,025
Other current liabilities	49

Total current liabilities	5,569

OPERATING LEASE LIABILITIES, NET OF CURRENT	2,427




OTHER NONCURRENT LIABILITIES	6

Total liabilities	8,002
Net assets	$	112,140

The summarized operating results of the VIE are through the date the Put Right was exercised and are as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2025		2024		2025		2024
Net revenues	$	672	$	3,174	$	2,654	$	3,174
Operating income	278		827		474		827
Net income	278		828		475		828

Unaudited Pro Forma Financial Information

The following table presents the estimated unaudited pro forma combined results of MediaCo and Estrella for the three and six months ended June 30, 2024, as if the acquisition had occurred on January 1, 2024:


	Three Months Ended June 30, (unaudited)			Six Months Ended June 30, (unaudited)
		2024		2024
Net revenues		$	28,722	$	54,649
Net loss before income taxes		(57,721)		(67,110)

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, 2024, 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 net loss income taxes.

- Definition

The entire disclosure for business combination.

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+ Details

Mediaco Holding Inc. 10-Q