Cbs, Hicks In Radio Deals

Television Digest with Consumer Electronics,  August 31, 1998  

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Meanwhile, Hicks, Muse, Tate & Furst-controlled Chancellor Media said it's acquiring Capstar Bcstg., also controlled by Hicks, Muse, for $2.3 billion in stock in what one analyst called "non-big news... the most anticipated transaction of the year." He said CBS announcement didn't come as surprise either: "It drove Karmazin crazy that people were overly concerned about the TV network's troubles."

New Infinity will have 155 radio stations, 80 of them in top 20 markets, that last year brought in revenues of $1.5 billion -- highest in industry, although Chancellor-Capstar had combined $1.6 billion revenues. On Wall St., analysts said deal would put Infinity on same level as most-favored radio groups, citing Clear Channel Communications as example. Included in public offering is CBS's minority interest in Westwood One. CBS TV, cable and syndication operations and Infinity will continue under existing common management, CBS said. Chmn.-CEO Michael Jordan predicted stock offering would "unlock the value of our largest and fastest- growing operating segment" and, at same time, "create a company with significant borrowing capacity." CBS "and its 80% ownership of Infinity... should continue to represent an attractive investment vehicle for future growth," he said. As part of continuing process of "streamlining its operations," CBS said it would take $50-$70 million "restructuring charge" in 3rd quarter - - mostly dealing with TV network and corporate overhead costs. Taking radio public follows widespread rumors that TV network's poor performance leaves company potential takeover target. Network lost $107 million in 1997.

In past, Chancellor has focused on ownership of large-market radio stations and currently owns or operates 102 stations in 22 markets. It made its first move into TV earlier this summer with $1.5-billion purchase of LIN TV (TVD July 13 p5) in transaction awaiting govt. approval. In contrast, Capstar has concentrated on medium radio markets, owning or operating 355 stations in 83 markets. Hicks, Muse will own 25% of combined companies, with Chmn. Thomas Hicks retaining that title with Hicks, Muse and Chancellor. His brother, Capstar Pres.-CEO Steven Hicks, will become Chancellor vice chmn., and Chancellor Pres.-CEO Jeffrey Marcus retains that title. Capstar holders will receive 0.48 Chancellor share for each Capstar share, making deal worth about $21.05 per share.

Standard & Poor's said deal has "positive implications" for CBS credit rating. Deal is expected to yield "as much as $3 billion... tax-free," S&P said, "resulting in a lower burden of financial obligation in aggregate for CBS." CBS debt ratings are BB+, except subordinated debt and preferred stock, which are rated BB-.

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