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CBC to sell stations

13 radio outlets net $72.5 mil; stock soars

NEW YORK — Children’s Broadcasting Corp., in the middle of a legal tussle with Walt Disney Co.’s ABC, agreed to sell its 13 radio stations to Global Broadcasting Co. for $72.5 million, it said Friday.

News of the high-priced sale sent CBC’s stock price soaring 62%, closing up $2.25 to $5.87. The stock price jump reversed a downward spiral over the past year which took the stock from $10 to a low of $3.

Wall Street traders rushed the stock, one said, because the sale agreement was worth $8 a share alone. But the deal has a lot of uncertainties, including whether the payment will come in cash or stock — and whether it will occur at all.

Payment not negotiated

A spokeswoman for CBC said only a “letter of intent” had been signed and details like form of payment had not been negotiated. The sale is subject to negotiation of a purchase agreement and due diligence investigations by the buyer.

The identity of the purchaser is also something of a mystery. Global Broadcasting Co. is a privately held New York-based broadcaster, CBC said, but the company is not listed in the New York telephone directory and one radio broker said he had never heard of it.

The sale comes at a critical time for CBC, which operates a radio network aimed at children called Radio AAHS! Its business received a severe setback last year when ABC terminated a contract to act as national sales rep for the company and started operating its own children’s radio network.

Change of heart

CBC has said repeatedly, including in an SEC filing June 2, that a key part of its future strategy was buying more stations to develop its network. But its finances are in dire straits — the company has never generated a profit since it started in 1990 and it has lost $18.6 million since the beginning of 1995.

CBC said in last week’s SEC filing that at the end of 1996 its auditors “expressed substantial doubt about the company’s ability to continue as a going concern because of recurring losses.”

It recently signed a new bank line agreement with Foothill Credit Corp. but it is already in violation of conditions of the bank line, CBC said in an SEC filing. CBC said Foothill had “waived its rights” on the violation.

Foothill received a warrant to buy 50,000 shares as part of its fee for arranging the loan, and early last week CBC filed a prospectus with the SEC to allow Foothill and another shareholder to sell the stock.

It is not clear why CBC suddenly changed its plans for buying more stations. CBC president Christopher Dahl said Friday the company still planned to continue creating and distributing children’s programming, although ABC’s entry into the market forced CBC “to alter its operations.”

Sale of the stations “will allow us to develop ancillary audio streams for AAHS! programming and to continue to serve our existing network of radio station affiliates, while significantly reducing our costs of operations,” Dahl said.

Aside from the stations it owned, AAHS’ network has 20 affiliates. A spokeswoman declined to comment on the length of the affiliation agreements.

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