With Tax-Free Entercom Merger, CBS Tunes Out Its Radio Business

With Tax-Free Entercom Merger, CBS Tunes Out Its Radio Business

A merger is in the offing. Broadcaster Entercom Communication Corp. is going to merge with CBS Radio Inc. giving CBS Corp freedom from the AM/FM radio business. This was after the possibility of a sale or IPO dwindled.

The CEO of Entercom Communication Corp., David Field will be leading the company to make the group of stations the second largest broadcaster in the United States of America. They’ll be just behind iHeart Media Inc. This group of stations dates back to the inception of CBS (Columbia Broadcasting System) back in 1927, making this a historic tax-free deal.

The media empire of Sumner Redstone’s family’s one half is CBS, and they have been looking to leave this terrestrial business of radio for the past year as all the listeners and advertising revenue are fleeing to tough online competition like Pandora and Spotify in a tailspin. The TV business of CBS, which is under Leslie Moonves, is a much more profitable business, as it is still the most watched TV serial in the US. The effort to pursue IPO after striking out with buyers like what they did with their outdoor segment also came up short, but this deal looks promising.

 

 

Thursday’s stamen by CBS said that the Entercom-CBS merger deal would be CBS’ way out of using Revers Morris, which is a tax-free transaction of two companies merging with a subsidiary, which was spun off. The shareholders of CBS are going to receive 105 million Entercom shares and own 72 percent of the company, while Entercom will get 28 percent. This would make Entercom a surviving public company.

The combined CBS Radio-Entercom will be a formidable player in radio with 244 radio stations nationwide, including WFAN and 1010 WINS in New York, KNX in Los Angeles and WBBM in Chicago, and the broadcasting rights to 45 professional sports teams in the U.S.

An Intelligence Analyst from Bloomberg said that Entercom would now be the only way for investors to capture the terrestrial radio market in the US. The whole combined company will be having a huge collection of stations and the strongest balance sheet of the entire industry.

Joseph Field, the Chairman of Entercom, has already agreed to vote in favor of the transaction, but the deal must be approved by shareholders of Bala Cynwyd.

Latham & Watkins LLP are Entercom’s legal counsel and Centerview Partners and Morgan Stanley & Co. are advising them. CBS’ advisors are Goldman Sachs & Co., while Wachtell, Lipton, Rosen & Katz are going to be their legal counsel.

This deal is expected to close by the second half of this year as it is still subject to regulatory approvals.

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