NEW YORK — Clear Channel Communications Monday agreed to buy AMFM Inc. in a $23.5 billion all-stock deal that will create the nation’s largest radio company.
The merged company will boast a market capitalization of roughly $40 billion, up there with some of the biggest and best known media and entertainment conglomerates. Its 830 stations in 187 markets will lend it major clout with advertisers. The new entity will rival the giant CBS radio group, which is now set to become part of Viacom.
The partners overlap in many markets so that Clear Channel will need to unload about 125 stations to comply with FCC ownership limits. Execs said a number of those will go to minority broadcasters. Station sales and swaps could rake in net proceeds of up to $4.6 billion, analysts said.
Niraj Gupta of Schroder & Co. noted that the revenue of all the stations to be sold, $550 million to $600 million, would constitute the third-largest station group in the U.S. Potential buyers include Disney, Cox Radio, Emmis, Entercom, Hispanic Broadcasting and CBS’ Infinity Broadcasting.
Negotiating for awhile
Clear Channel and AMFM, formerly called Chancellor Media, have been talking on and off for months. AMFM was looking for strategic partners last spring but its majority owner, buyout firm Hicks, Muse, Tate & Furst pulled it off the block in March due to an absence of suitable offers.
Heeding investor pressure, however, Hicks Muse did divest AMFM’s outdoor advertising business. It also scrapped plans to merge AMFM with its Lin Television business and ejected CEO Jeff Marcus. But AMFM stock continued to lag its peers. Hicks Muse chairman Thomas Hicks said Monday that he admired Clear Channel’s record on Wall Street, something he clearly wants to be part of .
The purchase, which includes the assumption of $6.1 billion in AMFM debt, calls for San Antonio-based Clear Channel to trade 0.94 shares of its own stock. for each AMFM share. The deal is expected to close in the second half of next year. Hicks Muse will remain the largest shareholder in the combined company, although its stake will fall from 27% to 10%.
The Mays family, Clear Channel’s owners, will hold 5% and Lowry Mays will remain chairman and CEO of the combined company. Thomas Hicks will become vice chairman. Mark Mays will be chief operating officer and Randall Mays, chief financial officer .
Clear Channel Radio president Randy Michaels and AMFM Radio CEO James de Castro, both highly regarded station operators, will likely work the combined radio group together.
All told, Clear Channel shareholders will own about 63% of the combined company and AMFM holders will own 37%.
The new company will own stations in 45 of the top 50 markets and more than 90 of the top 100 domestically and hold equity interests in 240 radio stations internationally in Australia, New Zealand, Mexico, Norway, England and the Czech Republic.
The radio assets can work in tandem with Clear Channel’s outdoor advertising unit, the nation’s second-largest, which operates 425,000 display faces in 35 U.S. markets as well as overseas. Clear Channel also owns 19 TV stations affiliated with Fox, UPN, ABC, NBC and CBS.
AMFM owns large media rep firm Katz Media.
Both AMFM and Clear Channel deliver syndicated radio programming nationwide, including Dr. Laura Schlessinger and Rush Limbaugh. And AMFM is in the process of developing an active Internet presence.
Clear Channel shares dipped on the merger news, falling 4.8% to $76.50. Stocks of an acquiring company often drop when a big purchase is announced.
AMFM headed higher, closing up 2% to $65.19.