Entercom Communications Corp. and CBS Corp. announced early Thursday morning that Entercom will take over CBS’ radio assets in a “tax free merger.” CBS had long been rumored to be looking for a buyer for its radio business. The price was not disclosed in the announcement.
Industry observers have been watching for months to learn the fate of the historic CBS radio holdings and brand. Now, according to the announcement, “the combined company will be known as Entercom and will be headquartered in Philadelphia, with a significant ongoing presence in New York.” In total, the new company will have 244 stations as well as digital assets and events; it said it will have stations in 23 of the top 25 U.S. markets.
However, Entercom President and CEO David Field noted in a conference call to investors that the company expects to make approximately 15 divestitures in markets where the combined entity will own more stations than the FCC allows. According to field, the sales or swaps will occur in Los Angeles, Boston, Sacramento, San Francisco and Seattle. Field also noted that, given the size of the companies, “there aren't that many stations that come into play.”
When the deal is completed, the new board of directors will consists of five current Entercom directors, including Field as chairman of the board, and four directors nominated by CBS Radio. Andre Fernandez will continue as president and CEO of CBS Radio through the closing of the transaction.
The sale of CBS’s radio business to Entercom will be effected through a “Reverse Morris Trust” transaction, according to the announcement. The transaction is subject to approval by Entercom shareholders. Entercom Chairman Joseph M. Field, a controlling shareholder of Entercom, has agreed to vote in favor of the transaction.
CBS shareholders will have the opportunity to exchange their CBS shares for CBS Radio shares. Immediately following the completion of this offer, CBS Radio will merge with an Entercom subsidiary, with the new CBS Radio shareholders receiving Entercom shares in exchange for their CBS Radio shares. After the merger, CBS Radio shareholders will receive approximately 105 million Entercom shares, or 72% of all outstanding shares of the combined company on a fully diluted basis. Existing Entercom shareholders will own 28% of the combined company on a fully diluted basis.
In the announcement, Field cited “scale-driven efficiencies and opportunities to compete more effectively with other media” as reasons for the merger. For example, the new combined sales force will be "1400 strong," according to Field. Also, Entercom CFO Steve Fisher says the company expects to realize $25 million dollars in efficiencies, mostly through elimination of corporate overhead and combining radio facilities in overlapping markets, in the 12-18 months after the deal closes.
The combined companies’ pro forma revenue on a trailing 12 months basis was approximately $1.7 billion, which, according to the release, makes the combined companies the second-largest radio owner by revenue.
The transaction is expected to close during the second half of 2017, subject to certain regulatory approvals and other customary closing conditions.