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EVERGREEN DEAL REVEALED

Exec sold stock just before major merger

NEW YORK — Evergreen Media Corp. president James DeCastro sold 50,000 Evergreen shares the trading day before Evergreen announced its merger with Chancellor Broadcasting Corp. and acquisition of Viacom Inc.’s radio group, according to an SEC filing Wednesday.

Since DeCastro’s stock sale, Evergreen’s price has fallen 13% to a low Tuesday of $28.50, although it rose 50¢ to $29 Wednesday.

DeCastro sold the stock at $32.65 on Feb. 14, the day before the Presidents Day weekend. Three days later, when the stock market reopened after the holiday, Evergreen announced it would merge with Chancellor in a stock swap deal, and simultaneously acquire Viacom’s radio station group for $1.07 billion in cash.

Chancellor execs said last month that talks on the merger had been proceeding for about a month before the Presidents Day weekend, but DeCastro insisted Wednesday he had “no idea” of the impending merger when he put in his sell order. He said the talks over the preceding month had been focused on a station swap.

No discussion

“There was never a conversation about us moving further toward a merger until later in that week, after I had put the order in to sell,” DeCastro said. He added that if he had known, he would not have sold.

DeCastro is a key operational exec in Evergreen, one of the fastest-growing radio groups in the country over the past couple of years. The merger with Chancellor makes the combined company the biggest pure radio broadcaster, although it will still be No. 2 to Westinghouse Electric Group’s CBS Inc. in revenue terms.

DeCastro’s sell order resulted from exercise of stock options held by DeCastro since he joined Evergreen in 1988, which allowed the exec to buy stock at 1¢ a share. That means he made a big profit on the sale — $1.6 million before taxes. DeCastro still holds 700,000 options on Evergreen stock, although he doesn’t own any stock itself.

Exercise program

Indeed, DeCastro said he had been exercising options and selling the underlying stock in batches over the past few years, raising money to build a house and more recently for estate planning purposes. DeCastro said it was not unusual for execs in the radio industry to hold no stock in the companies they work for.

He added that Evergreen execs are allowed to exercise options only within very restricted periods of time, usually a couple of weeks after the company has announced earnings. Evergreen reported earnings on Feb. 6, so DeCastro’s option exercise fell within that period.

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