Entercom Buying CBS Radio; Divestitures Seen, Ad Boost Possible
Entercom will buy CBS Radio in an all-stock transaction and become one of the nation's largest radio broadcasters, they announced. The deal could help make radio a more viable target for advertising dollars and investment, radio industry officials told us. To comply with FCC rules, the proposed deal will include the divestiture of about 15 stations, Entercom CEO David Field said during an investor call. Industry officials said they don't expect federal regulators to block the deal.
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The new company, which will still be called Entercom, will have “a nationwide footprint of 244 stations, including 23 of the top 25 U.S. markets,” and reach 93 percent of U.S. adults, Entercom said. It will allow Entercom to take advantage of that scale and wide reach, Entercom and CBS Radio executives said. “The alchemy is crazy good!” said Entercom Chief Operating Office Louise Kramer.
Having more “megagroups” with positive balance sheets is a positive for radio as an industry, said Patrick Communications media broker Gregory Guy in an interview. The larger group won't be competing with smaller radio stations, and makes radio as a whole look as though it’s moving in a positive direction as an industry, Guy said. CEO David Field said on Thursday's call the deal would allow Entercom to compete with other media for ad dollars, a prediction Guy agreed with: “This is a good thing for radio.”
“What has emerged (assuming the deal goes through and gets regulatory approval) is a stronger radio industry,” said BIA/Kelsey Chief Economist Mark Fratrik in a blog post. “The combined Entercom-CBS Radio group would be closer to the size of the industry leader -- iHeart Media -- which only can foster the radio industry's ability to compete against its many new competitors.”
CBS shareholders will be able to exchange their shares for CBS Radio shares, and after that exchange, the two companies will join, with the CBS Radio shareholders receiving Entercom shares in return. When the deal is complete, CBS Radio shareholders will own 72 percent, and Entercom shareholders will own 28 percent. Field will become chairman of the new company's board, among other changes (see 1702020058). The deal is expected to close in the second half of 2017, but still has to be voted on by Entercom's shareholders, the release said. “Entercom Chairman Joseph M. Field, a controlling shareholder of Entercom, has agreed to vote in favor of the transaction.”
Entercom stock closed up 11 percent to $15.70.