Radio and billboard behemoth Clear Channel Communications Tuesday announced plans to acquire live entertainment production-promotion giant SFX Entertainment in a transaction worth $4 billion.
In describing the motivation behind the deal, SFX prexy-CEO Mike Ferrel told Daily Variety, “When you marry such a significant media power with the largest live entertainment company in the world, the potential becomes far more captureable and exploitable through the combined entity.”
Ferrel said the promotional power of Clear Channel’s stations and billboards will drive attendance at SFX-promoted concerts and therefore increase the resulting marketing opportunities.
On the one hand, the stations benefit from increased visibility. When a concert is promoted on a particular station, that station becomes identified as the place to get concert information, win tickets and so forth. The potential for cybercasting concerts is enormous as well.
In the meantime, the advertising opportunities available stretch from banners inside the venues, concert programs, PA announcements and the tickets themselves, all of which opens the door to co-sponsorship deals with consumer goods makers ranging from automobile manufacturers to soft drink companies.
Under terms of the agreement, SFX Class A shareholders will receive 0.6 shares of Clear Channel Communications common stock for each SFX share, and SFX Class B shareholders will receive one share of Clear Channel for each SFX share. The deal also calls for Clear Channel to assume $1.1 billion of SFX debt. The transaction is expected to close this summer, subject to the approval of stockholders of both companies and government antitrust regulators.
Including pending transactions, Clear Channel — which last fall agreed to purchase AMFM (formerly called Chancellor Media) in a $23.5 billion, stock-only deal — owns 867 radio stations and 19 television stations in the U.S. and operates 550,000 outdoor advertising displays. Clear Channel also owns Premiere Radio Networks, which syndicates such popular programs as Rush Limbaugh, Dr. Laura Schlessinger and Jim Rome, and holds equity interests in more than 240 radio stations outside the U.S.
SFX owns or operates 120 live entertainment venues in 31 of the top 50 markets, including 16 amphitheaters in the top 10 markets. It also produces and promotes live music events as well as develops and manages touring Broadway shows in 55 markets. In addition, SFX is a significant player in the sports marketing and management world, representing more than 650 pro athletes and broadcasters. It’s also the largest producer of specialized motor sports shows in the U.S.
Following the announcement, SFX Class A shares climbed 50¢ to $38.50, while Clear Channel shares plunged $8.56 to $66.62. This would appear to indicate that some analysts and investors are skeptical about Clear Channel’s ability to digest its recent mega-purchases.
Separately Tuesday, SFX reported its 1999 year-end earnings. While revenues nearly doubled from $888.9 million in 1998 to $1.68 billion in 1999, SFX’s recent spree of acquiring sports management agencies caused interest expenses to nearly double as well, leading the company to post a 1999 net loss of $63.9 million, slightly less than its net loss of $68.7 million the previous year.