Justice Dept. OKs Westinghouse’s $3.9-Billion Purchase of Infinity

The Justice Department on Tuesday approved Westinghouse Electric Corp.’s $3.9-billion purchase of Infinity Broadcasting Corp., pushing the company one step closer to becoming the nation’s largest radio owner with 79 stations.

The clearance makes it easier for Westinghouse to split into two parts, which industry sources say the company is expected to recommend to shareholders today. Wall Street sources said the Westinghouse board approved a plan under which the industrial assets would be separated from the broadcasting properties.

As a condition of Justice Department approval, Westinghouse agreed to sell two stations, in Boston and Philadelphia, to reduce its share of radio revenues in those markets to 40%. In Los Angeles, Westinghouse would control 26% of the radio advertising through ownership of four FM and two AM stations.

The concessions, considered relatively mild by industry analysts, are likely to lift a chill on radio consolidation that set in this fall when the department began challenging such mergers even after federal legislation relaxed ownership rules in February.

The Westinghouse-Infinity merger is expected to clear the Federal Communications Commission and be put to a shareholder vote Dec. 10. Shareholders may be asked at the same time to approve the company split.

Westinghouse’s stock has languished since the company completed its purchase of CBS Inc. early this year, in part because of investor confusion over its far-flung mix of assets, which include power generation and refrigeration equipment, as well as the CBS network and radio group.

Separating higher-valued broadcasting from industrial assets is expected to propel the stock. The two resulting companies would each have roughly $5 billion in revenue, with Michael Jordan, chairman of Westinghouse and architect of the split, running the new New York-based broadcasting entity.

On Tuesday, Westinghouse shares rose 62.5 cents to close at a five-year high of $20.625 on the New York Stock Exchange. Infinity shares jumped $1.25 to close at $35, also on the NYSE.

Under the Justice Department agreement, Westinghouse would swap WBOS, an FM station owned by Infinity in Boston, as well as CBS’ FM station in Philadelphia, WMMR.

This is the third case in which the department has required merging radio companies to restructure their deals since passage of the 1996 Telecommunications Act allowing ownership of as many as eight stations in the same market. Last month, in a settlement that sent radio stocks tumbling, regulators required American Radio Systems Corp. to divest three of five stations it sought to buy in Rochester, N.Y., bringing the company’s share of local radio revenues to 43% rather than the proposed 63%.

The decisions rattled the radio industry, which has rapidly consolidated over the last year. The industry viewed the Justice Department’s standards as arbitrary, considering that radio controls only 7% of all advertising revenues nationwide and is dominated in local markets by newspapers.

Analysts said the department might allow owners to control more than 40% of the radio revenues in smaller markets with fewer viable stations.

To clear regulatory hurdles, Westinghouse had already announced plans to sell or divest several stations in Chicago and Dallas, where it exceeded the eight-station limit.