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Westinghouse to Purchase 98 Radio Stations for $2.6 Billion

Acquisitions: CBS-American Radio Systems deal would give nation's leading owner a stronger hold on markets below the top 10.

September 20, 1997|From Bloomberg News

Westinghouse Electric Corp. agreed to buy the broadcast operations of American Radio Systems Corp. for $2.6 billion, giving the nation's largest radio station owner a stronger grip on markets outside the top 10.

Westinghouse, which also owns the CBS television network, would pay $44 a share in cash, or $1.6 billion, and assume $1 billion in debt for the fifth-largest radio company's 98 stations. Before the transaction is completed, American Radio will spin off its radio and telephone tower business.

The purchase comes amid a wave of consolidation following loosened limits on station ownership. And it shows that CBS radio and television station boss Mel Karmazin is serious about maintaining the company's dominance in radio; Westinghouse would have 175 stations from New York to Seattle.

"It extends its reach in markets below the top 10, and is a meaningful acquisition in size and bulk," said Edward Hatch, an analyst with UBS Securities.

Shares of American Radio, which had gained 33% since the company signaled last month it might be for sale, fell $3.94 to close at $47.94 in New York Stock Exchange trading.

Westinghouse shares rose 50 cents to close at $26.50, also on the NYSE. They earlier reached $27.13, the highest level in six years.

Pittsburgh-based Westinghouse became the largest radio company last year with its $3.8-billion acquisition of Karmazin's Infinity Broadcasting Inc.

Westinghouse plans to split into separate broadcasting and industrial companies in the next month or two, finishing the company's transformation led by Chairman Michael Jordan.

As part of that plan, Westinghouse sold its Thermo King refrigeration unit to Ingersoll-Rand Co. Monday for $2.56 billion. The broadcasting part will be renamed CBS Inc.

American Radio said Aug. 20 that it hired a banker to develop a plan to boost its stock, signaling it might be for sale.

The acquisition is expected to add $175 million in cash flow, or earnings before interest, taxes, depreciation and amortization, to CBS Radio's projected amount of $685 million next year, Hatch said.

American Radio gives Westinghouse 19 stations in the top 50 markets in the country, including some where CBS has existing radio and television stations.

One of the reasons for the recent round of industry purchases--in which stations worth more than $20 billion have changed hands--is the advertising and administrative cost savings that come with owning more stations in a market. Until recently, the government had tight restrictions on ownership.

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