Mega Entercom/CBS Radio Deal
Early yesterday morning, CBS Corp. formally announced it was getting out of the radio business after nine decades. Pause for a moment and let the enormity of that news sink in. The headline here is that CBS Corp. is spinning off its radio division to former rival Entercom, creating a broadcast platform of 244 radio stations and a foothold in 23 of the Top 25 major markets. This mega-deal with the Philadelphia-based Entercom is designed to be tax-free to CBS shareholders through a complex process known as a “Reverse Morris Trust,” which begins with an offer to existing CBS Corp. shareholders to exchange their stock for shares in the newly enlarged Entercom. The completed merger will make Entercom the second-largest radio company based on revenue and leave CBS shareholders with 72% of the newly enlarged Entercom.
“This agreement is great for shareholders and achieves our previously stated objectives by separating our radio business in the best possible way,” said Les Moonves, Chairman & CEO of CBS. “Entercom is a superbly run company, and together with CBS Radio’s powerful brands and remarkable people, we are creating an organization that will be even better positioned to succeed in this rapidly evolving media landscape.” David J. Field, Entercom President and CEO commented, “This transformational transaction creates scale-driven efficiencies and opportunities to compete more effectively with other media to better serve our listeners and our advertisers. The combination of a compelling strategic fit, an excellent balance sheet, and robust free cash flow generation, position us to create significant shareholder value for our investors.”
It was announced that Field would remain CEO of the newly combined company. CBS Radio President & CEO Andre Fernandez is expected to exit after the deal closes, which CBS estimates would be in the second quarter, subject to the usual regulatory approvals and other customary closing conditions. The transaction is also subject to approval by Entercom shareholders; however, Entercom Chairman Joseph M. Field, a controlling shareholder of Entercom, has agreed to vote in favor of the transaction.
Industry observers are already playing parlor games with the seven markets where both companies currently overlap: Boston, Los Angeles, Miami, Sacramento, San Diego, San Francisco and Seattle. Look for Entercom to unload up to 15 prime stations to meet local ownerships caps.
