Chancellor Media Corp., the second-largest radio broadcasting company in the U.S., said Monday it has agreed to buy closely held outdoor advertising firm Martin Media for $610 million in cash.
Martin Media, based in Paso Robles, Calif., is the seventh-largest outdoor advertising company in the country, with more than 13,000 billboards and outdoor displays in 12 states.
The acquisition gives Chancellor a way to increase its share of local ad revenue by packaging air time with billboard space, allowing it to offer attractive rates and exposure for advertisers that smaller competitors may have difficulty matching.
Chancellor indicated it expects to capitalize on that by making more acquisitions in the outdoor ad industry.
With Martin Media, Chancellor's clout with local advertisers would be particularly strengthened in the half-dozen markets where it has radio stations and Martin Media has billboards.
The transaction also lets Chancellor advertise its own radio stations on Martin's billboards in the six markets in which the two companies overlap--Los Angeles, San Diego and Riverside in California, as well as Pittsburgh, Cincinnati and Washington.
Chancellor, with 108 radio stations, had revenue of $582 million last year.
About 42% of Martin's business is in markets where Chancellor has radio stations, Chancellor said.
Chancellor was formed in September by the combination of Evergreen Media Corp. and Hicks Muse Tate & Furst Inc.'s Chancellor Broadcasting Co. Chancellor ranks behind only CBS Corp. in revenue in the radio industry.
The purchase is the first for Chancellor under President and Chief Executive Jeffrey Marcus, who joined the company at the beginning of this month, replacing longtime executive Scott Ginsburg. Marcus was brought in to help lead the company's expansion beyond radio, and the company has said it is interested in the TV industry as well.
"This is the first of what we see as additional moves to create a multimedia platform," Marcus said. "We intend to expand in outdoor. It provides a very good complement to radio platform."
Spending on billboard advertising rose 8.8% last year to $2.14 billion, according to the Outdoor Advertising Assn. of America.
That growth has attracted a number of radio broadcasters interested in diversifying. The outdoor ad industry has seen about $9 billion of acquisitions in the last three years, according to Outdoor Services Inc., which helps advertisers buy ad space.
Chancellor said the purchase will add to earnings immediately and boost cash flow by 3 cents a share next year. The company is paying 11.5 times estimated 1999 cash flow, which is at the low end of multiples of recent acquisitions in the outdoor ad industry, analysts say.
Martin is expected to have revenue of about $90 million this year.
Tom Martin of Martin Media will retire, and Chancellor said it plans to bring in another executive to run Martin.
Chancellor expects to complete the purchase in the third quarter.
Shares of Irving, Texas-based Chancellor rose $1 to close at $46.06 on Nasdaq.