Jacor jockeying

Stock spikes as talk of sale to CBS buzzes

NEW YORK — Stock of No. 3 radio broadcaster Jacor Communications soared 11% Wednesday as expectations rose that sale of the $4 billion company is imminent to a buyer likely to be CBS Corp. in a deal that would cap several years of consolidation in radio.

While Clear Channel Communications is also thought to be looking at Jacor, CBS president Mel Karmazin is believed to be keenly interested in winning Jacor.

Jacor is not only seen as a good fit for CBS, which is about to spin off its radio stations into a reconstituted Infinity Media Corp., but the acquisition would re-establish the Eye’s unquestioned ranking as the biggest radio operator.

It lost that status last month after Chancellor Media Corp. unveiled its merger with Capstar Broadcasting (Daily Variety, Aug. 28). The Eye insists it is still the biggest when counted by revenue, but the difference is marginal.

Acquisition of Jacor would add its 226 stations to CBS’ 161 stations and increase the Eye’s radio revenues to at least $3 billion, well ahead of Chancellor, although that company will still be ahead by radio station count. After Chancellor merges with Capstar Broadcasting, it will have 463 stations.

Jacor’s controlling shareholder, Chicago investor Sam Zell, is believed to have retained Donaldson Lufkin Jenrette in midsummer to find a buyer after sporadic attempts to sell over the past couple of years were unsuccessful.

Talk has circulated on Wall Street in recent days that a deal was a couple of weeks away, with CBS thought to be in the best position to win the auction. Indeed, Karmazin is believed to have been in Chicago earlier this week, although he could have been there to meet CBS’ station managers rather than Zell. Neither CBS nor Jacor would comment.

Jacor stock jumped $5.12 to $52.37 Wednesday amid a strong market rally. CBS barely budged, however, rising just 25¢ to $27, while Clear Channel jumped $4.50 to $49.93.

Still, Zell has been seen as a seller of Jacor for some time, and the latest deal may yet collapse. Broadcasting stocks have sagged in the past two months in a selloff precipitated by worries about a slowdown in advertising spending and the broader market’s correction.

The question now is whether Zell, who owns 26% of Jacor in a partnership with the Chilmark Fund, will sell at a lower price than he could have received six months ago. Despite Jacor’s rally Wednesday, the stock is still well below its year-high of $65.25.

Wall Streeters say a lower-priced sale will depend on whether Zell believes radio prices peaked earlier this year and won’t revisit those lofty levels for some time to come.

Prudential Securities analyst James Marsh Jr. believes that recent market turmoil will “flush out some sellers on the private side as well as publicly traded companies.” Would-be sellers will stop playing coy, he said, “because they may think these are the best multiples they’ll see in a while.”

Jacor chairman Zell qualifies as just such a seller. “He’s a financial player, not a radio operator,” Marsh said.

The other uncertainty about Zell is whether he wants stock or cash, as CBS could more easily finance a cash deal than Clear Channel. But Clear Channel’s stock trades at higher levels than CBS stock, which could give Clear Channel an edge, some on Wall Street believe.

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