Hicks Muse Will Combine LIN and Chancellor

Hicks, Muse, Tate & Furst, a closely held investment firm, is combining LIN Television Corp. and Chancellor Media Corp. in a $1.67-billion transaction to build a radio and television business to rival CBS Corp. and other bigger companies.

The move lets Chancellor, the second-largest U.S. radio broadcaster, enter the television business for the first time. LIN, which Hicks Muse bought in March, owns eight network-affiliated stations and has stakes in four others. Hicks’ stake in Chancellor, meanwhile, will double to 18%.

Hicks Muse Chairman Thomas Hicks, who is also chairman of Chancellor, hired former Marcus Cable Co. Chairman Jeffrey Marcus in May to build a company with interests in radio, TV and billboard advertising. Their plan is to provide advertisers the chance to reach more customers through different types of media.

Chancellor will swap about $903 million in common stock, or 0.03 share for each LIN common share, based on Chancellor’s closing price of $51 on July 1, when the ratio was established. This means the company will issue 17.7 million new shares to buy LIN. Chancellor also will take on $769 million in LIN debt, the U.S.’ 22nd-largest television broadcaster. The number of Chancellor shares to be issued may be adjusted to maintain the total value of the transaction.

Shares of Irving-based Chancellor fell $3.06 to close at $50.75 on Nasdaq. The stock had risen 31% in the six weeks before the agreement.

Hicks Muse also owns TV stations through its Sunrise Television division and radio stations through Capstar Broadcasting Corp., which went public in May and is now 55% owned by Hicks Muse.

Hicks Muse, a Dallas-based leveraged buyout firm active in acquiring media companies, paid $1.9 billion for LIN last March, before spinning off a Dallas television station into a joint venture with General Electric Co.’s NBC.