More Entercom Divestiture Notes

Entercom CBS Radio SprinoffsDuring today’s quarterly earnings call, Entercom CEO David Field shared a few other details regarding the pending closing of its merger with CBS Radio.

The merger is still set to close on November 17 following the expiration of CBS Radio’s stock swap offer on the 16th and the vote of Entercom shareholders on the 15th. The first step of the remaining FCC approval came today when the agency approved the sale of 100.3 KSWD Los Angeles, 92.1 KSOQ-FM Escondido CA, and 95.9 WGGI Berwick PA to Educational Media Foundation. FCC approval of the merger is the last regulatory hurdle Entercom must surpass.

Field originally expected to save $25 million from cost savings related to eliminating overlap between the two companies. He is now quadrupling the expected synergies to be over $100 million eliminating redundancies, combining management teams in markets where both companies previously operated, and eliminating excess real estate.

Entercom has already done research studies for all of the markets it will be acquiring to find ways to improve or adjust their standing. Field stated that CBS Radio had lagged on research in recent years leaving the stations to “fly blind”.

In the SEC filing last month announcing the stations to be spun-off, Entercom announced it would receive $265 million cash and eleven stations for the necessary divestitures. After the $57.75 million it will receive from EMF and the $12 million from Beasley as part of its Boston swap, there is still $195.25 million unaccounted for. That will come from the eventual divestitures of the markets being leased to Bonneville and to balance out the iHeart swap. But how do they get there? Field stated today that Entercom will use over $150 million of divestiture proceeds for further acquisitions and swaps.

As part of Entercom’s settlement with the Department of Justice, the LMA on these stations to Bonneville cannot last longer than one year. No amendments to the LMA can be made without the DOJ’s approval. Entercom is also ordered to sell the stations out of the divestiture trust within 180 days. As we noted yesterday, CHR “99.7 Now” KMVQ with its subfocus on the local LGBTQ community and Urban AC 102.9 KBLX are not the prototypical Bonneville stations. Is a deal with an additional party to exchange those stations for other stations or money to go back to Entercom in the pipeline?

Same goes for iHeart. With that company battling its lenders are they waiting to finalize a deal to sell or swap for other stations elsewhere to raise the money or additional stations to send to Entercom? Either way another round of acquisitions are coming for Entercom.

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