And the broadcast deals keep on coming.
In what it billed as the largest radio transaction in history, Chancellor Broadcasting Co. of Dallas on Thursday agreed to pay $395 million for Burbank-based Shamrock Broadcasting Inc., whose most prominent investor is Roy E. Disney.
However, to call the Chancellor-Shamrock deal a record-setter is to overlook that two even bigger radio groups are changing hands with Walt Disney Co.'s proposed acquisition of Capital Cities/ABC Inc. and Westinghouse Electric Corp.'s bid for CBS Inc., both announced this week.
The radio landscape is being transformed by a consolidation wave that is propelled--just as on the TV side--by a strong advertising market, the prospect of relaxed federal regulations on station ownership and the economies of scale that come with size.
Until Monday, the biggest-ever radio group sale was the 1989 purchase of Legacy/Metropolitan Broadcasting--including KTWV-FM, "The Wave," in Los Angeles--by Westinghouse's Group W unit for $385 million. But this wild week has seen three deals to top it.
By absorbing CBS and its 21 radio outlets reaching some 15 million people, Westinghouse would create a 39-station behemoth far outstripping its closest competitor, Infinity Broadcasting Corp. of New York, which owns 27 stations.
"Of the $5.4 billion paid [by Westinghouse for CBS], you could argue that $1 billion was for radio alone," said broadcast analyst Harry J. DeMott of CS First Boston. "It's by no means an afterthought."
While the ABC chain of 21 radio stations might also be valued as high as $1 billion, according to DeMott, radio could be fairly termed an afterthought in the $19-billion Disney-Cap Cities deal.
Shamrock owns 19 stations, mainly west of the Mississippi, including Los Angeles' KZLA-FM, which plays country music, and KLAC-AM, which plays oldies and is the longtime broadcast home of basketball's Los Angeles Lakers.
Chancellor, a privately held firm founded only two years ago, already owns 14 stations, including three in Sacramento. The groups fit well geographically in that only in Minneapolis-St. Paul would they overlap enough to concern regulators.
After the merger, Chancellor would have three FM and two AM stations in the Twin Cities, violating the current federal rule against owning more than two AM and two FM outlets in a single market. The company said it would apply for a waiver.
The merged Chancellor would generate annual revenue of about $160 million, ranking it fifth in sales behind Group W-CBS, Infinity, Disney-ABC and Evergreen Media Corp. of Irving, Tex., according to Steven Dinetz, Chancellor's president and chief executive.
Dinetz co-founded the company with the Dallas-based leveraged buyout firm of Hicks, Muse, Tate & Furst. Thomas O. Hicks, chairman and chief executive of Hicks, Muse, said the Shamrock acquisition would be financed with $145 million of bank debt, $100-million equity contribution by Hicks, Muse, and the remainder in bonds to be sold to the public.
Hicks said Chancellor began talks with Shamrock last March. He said the size of the bid, as well as the fact that the deal seems to present few regulatory problems, persuaded Shamrock to say yes.
Dinetz, who joined Hicks in a telephone interview Thursday, said the Shamrock stations are "not overstaffed" and that he anticipated few layoffs.
"If anything, we'll probably increase the size of the advertising sales staff," he said, noting that Chancellor has been successful in boosting the profitability of its stations by focusing on local ad sales.
With radio stations selling for historically high prices, the key to making a deal work is controlling costs and pumping up ad sales--all in the service of higher profit margins.
Michael Bandzierz, managing director of Toronto Dominion Bank-New York, a major broadcasting lender, said bankers expect broadcasters to justify the high prices by demanding that they "improve performance year after year."
In the current climate, even with healthy advertising revenues and the anticipated regulatory relief from telecommunications legislation now before Congress, Bandzierz said station prices are "very full." He added: "I think the values are sustainable, but I'm not sure how much higher they can go."
Clifford Miller, managing director of Shamrock Broadcasting, said he and his investors decided to sell out after 16 years in radio because "the price was too good to pass up."
The sale was announced only three days after the stunning news from Walt Disney Co., of which Roy E. Disney--Walt's brother--is vice chairman. Miller called the timing of the two deals "purely coincidental" and said that there is "absolutely no business relationship" between Shamrock and Walt Disney Co.
Miller, who rode through a boom and bust in radio values in the mid-1980s, said of the current rush for deals: "I think there's a feeding frenzy for media properties. . . . I think at least in the radio market, the cycle either is peaking or has peaked."
(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)
For more than four years, Group W's purchase of Legacy/Metropolitan Broadcasting (parent of KTWV-FM, "The Wave" in Los Angeles) stood as history's biggest radio deal, at $385 million. That record was broken three times this week. Here are several deals in radio's hottest summer that have exceeded the quarter-billion-dollar mark: *--*
Date Radio group Number of stations Buyer Aug. 1 CBS 21 Westinghouse July 31 Cap Cities/ABC 21 Walt Disney Aug. 3 Shamrock 19 Chancellor July 17 Pyramid 12 Evergreen
Date Price (millions) Aug. 1 $1,000* July 31 $1,000* Aug. 3 $395 July 17 $307
* Analyst estimates
Source: Company representatives