CBS’ status as the biggest radio broadcaster may be under threat. Chancellor Media Corp. is negotiating a merger with Capstar Broadcasting, to form a radio giant with more than 400 radio stations, Wall Street sources say.
At the same time, there is also talk that the combo may also swallow up No. 3 radio group Jacor Communications, which would make the resulting company into a titan of 600 stations and $1.9 billion in annual revenues. CBS has 175 stations and about $1.4 billion in revenue.
Jacor’s participation in the deal is far from certain. Radio industry sources say Jacor and Chancellor came very close to finalizing the deal two weeks ago, before talks broke apart, but there were rumors Friday that negotiations may have started again.
Goldman Sachs is said to have been retained to get the deal done. Jacor has long been expected to be sold because it is controlled by investor Sam Zell, who most Wall Streeters expect will take advantage of the current high prices for radio stations.
Under one scenario apparently being discussed, Chancellor CEO Scott Ginsburg would run the combined company while Jacor CEO Randy Michaels would oversee programming. Neither Jacor nor Chancellor would comment.
The Chancellor-Capstar part of the deal is more likely to come together sooner, as both companies are effectively controlled by Dallas-based Hicks, Muse, Tate & Furst. Hicks owns 15% of Chancellor and 61% of Capstar. The big question, Wall Streeters say, is the price. Chancellor is likely to buy Capstar, and in that situation, Chancellor’s public shareholders would be watching closely to make sure Chancellor doesn’t give Hicks a better deal than it deserves. A spokesman for Hicks did not return calls.
The firm had been looking to take Capstar public earlier this year. A merger with Chancellor, which is already public, would accomplish that. As well as being big, the resulting giant would have a strong presence across a range of markets.
Capstar’s stations are mainly in markets No. 50-150, while most of Chancellor’s stations are in the top 50 markets.
Feds take hard look
The Justice Dept. is beginning to take a stand against radio mergers, asking a court Nov. 6 to block Chancellor’s acquisition of four SFX Broadcasting stations in Long Island, N.Y. The deal, which predates Capstar’s proposed acquisition of SFX, called for a swap of the four Long Island stations for Chancellor’s stations in Jacksonville, Fla. and $11 million in cash.
The Justice Dept. is concerned that Chancellor would end up with 65% of the Long Island market. Whether the department’s attitude will affect the latest merger talks isn’t known, although there is little doubt the resulting company would have to sell some stations to avoid antitrust problems.