Deal Would Create New Radio Powerhouse

Clear Channel Communications Inc. is taking over Jacor Communications Inc. in a $3.4-billion stock deal announced Thursday that creates a powerhouse with more than 450 radio stations.

If given regulatory approval next year, the buyout would reduce to three the number of giant players in the rapidly consolidating radio industry, along with Chancellor Media Corp. and CBS Corp.

Jacor, based in Covington, Ky., near Cincinnati, went through its own buyout binge since radio ownership rules were relaxed in 1996. The company also provides syndicated radio programming, including talk shows featuring Rush Limbaugh, Dr. Dean Edell, Dr. Laura Schlessinger and Art Bell.

In recent years, Clear Channel and Jacor were virtually tied as the second-largest radio company, but they slipped down the rankings as CBS acquired Infinity Broadcasting and American Radio Systems and Chancellor announced plans to acquire Capstar Broadcasting Corp.

Clear Channel said it hopes to obtain Justice Department and Federal Communications Commission approval by Sept. 30 for the deal, which would make Jacor a subsidiary of Clear Channel.

“It doesn’t feel much like a takeover to us,” said Randy Michaels, who would remain as Jacor’s chief executive. “We rather actively sought this merger out. We’re very enthusiastic about it. It feels like a partnership.”

The purchase would give Clear Channel, based in San Antonio, 454 radio stations in 101 U.S. markets, as well as 20 TV stations and outdoor advertising businesses in 25 countries.

Under the deal, each share of Jacor common stock would be converted into 1.4 Clear Channel shares. Based on the closing price of Clear Channel’s stock Thursday of $36.63 per share--down 38 cents--the deal would be worth about $3.4 billion, not including Clear Channel’s assumption of Jacor’s more than $1.26 billion in debt. Jacor’s shares rose 44 cents Thursday to $40.56.

Clear Channel trades on the New York Stock Exchange, Jacor on the Nasdaq Stock Market.

The companies said the final purchase price will be based on the average closing price of Clear Channel’s shares during a 25-trading day period before the closing date.

Clear Channel already has $2.8 billion in debt, management said. But the companies said they plan to use their resources--including almost $1 billion in marketable securities--to pay down that debt by the time the deal closes.

Clear Channel and Jacor last year had combined radio station revenue of about $1.1 billion, which would rank third behind Chancellor and CBS. Clear Channel would rank second in station ownership.

The deal appears a good fit for both companies, said Jim Duncan, president of Duncan’s American Radio in Indianapolis.