The great Outdoor

Infinity to buy billboard firm in $8.3 bil deal

NEW YORK — CBS Corp. subsidiary Infinity Broadcasting, already the country’s largest radio broadcaster, announced plans Thursday to become the largest outdoor-advertising company as well by acquiring Outdoor Systems in a deal valued at $8.3 billion.

The agreement, which will be finalized in the fall, consists of two parts: Infinity issuing 250 million shares, valued at $6.5 billion at the $26 stock price when it was announced, and absorbing $1.8 billion in Outdoor Systems debt.

Although Infinity stock fell $1 Thursday to close at $25 a share, most Wall Street analysts applauded the acquisition, calling the terms favorable to CBS’ majority-owned radio-and-outdoor subsidiary.

CBS stock also gave up $1 Thursday to end at $40 a share, while Outdoor gained 69¢ to close at $29.50 a share.

Immediate contribution

Infinity chairman and CEO Mel Karmazin, who also heads up CBS, supported analysts’ upbeat assessment by noting that Outdoor will immediately contribute to Infinity earnings on an after-tax cash flow basis.

“Our new industry-leading outdoor advertising company, combined with the biggest and best radio company in the business, will make Infinity the premier local advertising platform, one that is second to none,” Karmazin said.

The deal, which received unanimous approval from both boards, will deliver 1.25 Infinity common shares for each Outdoor share.

It also calls for Outdoor president and CEO Arte Morenoto to serve as CEO of the unit once it becomes a wholly owned Infinity subsidiary.

Outdoor chairman William Levine will relinquish his title but, like Morenoto, will sit on Infinity’s board.

Both execs have agreed to vote their shares, representing 26% of Outdoor’s total, in favor of the acquisition, as has Infinity parent CBS Broadcasting.

Top outdoor ad firm

Outdoor is considered the country’s premier outdoor-ad company, with 112,000 bulletin, poster, mall and transit advertising displays in 90 major markets in the U.S., 13 in Canada and 44 in Mexico.

The Phoenix-based company’s operations are mostly clustered in urban areas, including all of the 50 largest U.S. markets, 44 of the 45 largest Mexican markets and 13 of the 15 largest Canadian markets. It also owns 125,000 subway displays in New York City.

The company’s leadership is considered first-rate, with one Wall Streeter complimenting Outdoor for reducing its dependence on tobacco advertising to less than 1% before prohibition of that category kicked in this year.

Outdoor’s assets will be combined with those of TDI — Infinity’s existing outdoor unit, which operates 2,000 display faces and more than 1 million other transit displays worldwide — to make Infinity the largest outdoor media company in the world.

In addition to its outdoor division, Infinity operates more than 160 radio stations and manages radio network Westwood One, in which it owns a stake.

Infinity’s 1998 sales totaled $1.9 billion, up 28.5%, while Outdoor’s totaled $786.9 million, up 49.2%.

Infinity’s individuality

Infinity didn’t emerge as an entity distinct from CBS Corp. until last December, when an initial public offering of 155 million shares generated net proceeds of $3 billion.

After that offering, CBS’ stake represented 81.8% of Infinity equity and 95.8% of the voting power.

The Outdoor transaction will leave CBS with the same 700 million Infinity shares, but, because of the additional 2.5 million allocated to Outdoor shareholders, the Eye’s interest in its radio-and-outdoor subsidiary will decrease to 62%.