ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Friday, June 21, 1996 TAG: 9606210040
SECTION: BUSINESS PAGE: B-5 EDITION: METRO
DATELINE: NEW YORK
SOURCE: ASSOCIATED PRESS
CBS owner Westinghouse Electric Corp. agreed Thursday to buy Infinity Broadcasting for $3.9 billion, a deal made possible by deregulation and one that brings together the two biggest players in radio.
The purchase also brings two of the biggest names in radio, Howard Stern and Don Imus, to the network of the late Edward R. Murrow.
Just seven months after its $5.4 billion purchase of CBS Inc., Westinghouse's acquisition of Infinity represents its next biggest step toward reinventing itself as a broadcasting power.
``You're creating a General Motors of radio-station operations,'' said John Reidy, a media industry analyst at Smith Barney Inc.
Specifically, the merger will make Westinghouse the operator of 83 radio stations with total revenue of about $1 billion a year. It will be present in 16 markets with 69 of its stations in the top 10, which include Los Angeles, New York and Chicago.
The purchase, which also includes the assumption of about $1 billion in Infinity debt, will expand Westinghouse's position as the nation's biggest radio station operator.
Westinghouse is also a television power, with the CBS network and 15 TV stations, though it is in the process of divesting one of them.
``We have always looked, since the CBS acquisition, at radio as being one of the greatest opportunities we in Westinghouse had in the entire media business,'' Michael H. Jordan, Westinghouse's chairman and chief executive, said at a news conference.
He cited growth in radio advertising revenue and the recent telecommunication law, which led to new rules allowing companies to own more stations in the same market.
In fact, Infinity Broadcasting Corp. CEO Mel Karmazin said the legislation directly influenced the decision to merge.
``When that bill passed, the first call I made was to Westinghouse/CBS,'' he said. ``There was no question, there was absolutely no question, that the transaction that made sense was a combination of the Infinity company with the Westinghouse/CBS company.''
Terms of the deal call for Infinity stockholders to receive 1.71 Westinghouse shares for each share they own. It is expected to be completed by year's end, following regulatory approval. Shareholders of both companies must also approve the deal.
The two sides said a majority of Infinity shareholders had already agreed to back the acquisition.
Infinity, which brings 44 radio stations to the marriage, ranks as the nation's biggest independent radio company and the second-largest overall. It owns and distributes ``The Howard Stern Show'' as well as ``Imus in the Morning.''
The companies said the combination will allow them to assemble clusters of radio stations in large markets. That structure, they said, will let them become more efficient and profitable.
Given that the merger will bring together the top two competitors in the business, though, their executives were immediately asked whether the deal would raise objections from antitrust regulators, who have grown more active in recent years.
The companies said they believe it will not be an issue.
Karmazin, who founded Infinity and will become a major Westinghouse shareholder, will lead the radio unit after the merger as chairman and chief executive.
He will also remain chief executive of Westwood One Inc., a big radio network operator in which Infinity owns minority stake. Its operations include the Mutual Broadcasting System and NBC Radio Network.
``If there's an antitrust problem, that's where it's going to be,'' said Dennis McAlpine, a media analyst at Josephthal, Lyon & Ross Inc. McAlpine feels Westinghouse will eventually have to buy all of Westwood One or sell the stake.
The genesis of the merger, as Karmazin explained, was the deregulation of federal telecommunications law, which led the Federal Communications Commission to loosen radio-station ownership rules.
In March, the FCC removed all limits on the number of stations a company may own. The previous limit was 20 AM and 20 FM stations nationwide. The FCC also is letting companies own from five to eight radio stations in the same market. They had been limited to four stations in a large market or three in a small one.
Karmazin said several stations will need to be either divested or swapped to meet the new ownership limits.
For Pittsburgh-based Westinghouse, the deal comes as its works to develop a plan to separate its broadcasting operations from its traditional industrial businesses, like electric generators and refrigerated vehicles. Jordan said the acquisition could facilitate that effort.
The stock of both companies reacted to news of the purchase. Westinghouse slipped 75 cents to $18.121/2 a share in trading on the New York Stock Exchange. Infinity Class A was up 50 cents to $29.121/2.
Infinity, which is based in New York, has been a prolific buyer of radio stations recently. In March, it spent $410 million on a dozen stations in five big markets, following an earlier purchase of seven stations.
With shock jocks aboard like Stern and Imus, Infinity is no stranger to scrutiny. In fact, it agreed last year to pay the federal government more than $1.7 million to settle five indecency charges brought against Stern by federal regulators between 1989 and 1994.
How will a more raucous Infinity get on with the traditional corporate executives of Westinghouse Electric Corp.?
``As long as Howard follows the rules, and he's been following the rules, that's fine,'' Jordan said. ``We believe in diversity.''
LENGTH: Long : 108 lines ILLUSTRATION: PHOTO: AP. Westinghouse's Michael H. Jordan (left) andby CNBInfinity's Mel Karmazin announce the merger of their companies
Thursday.