NEW YORK — Infinity Broadcasting Corp., a unit of CBS Corp. and the second-largest U.S. radio network, plans an initial stock sale today that could raise $2.8 billion.
Infinity, whose stations carry the Howard Stern and Don Imus shows, expects to sell 135 million shares at $19 to $22 each, making it the fourth-largest IPO by a U.S. company this decade. The sale would give Infinity a total market capitalization of about $17.1 billion, about three-quarters of the market cap of CBS, which bought the radio company for $3.8 billion more than two years ago and has since added assets to the radio division.
CBS, which also owns a television network, 14 TV stations and several cable networks, would continue to own about 84% of the fast-growing and profitable Infinity. Proceeds of the sale would go primarily to pay $2.5 billion owed CBS as a dividend.
"You're really taking a risk here," said Mark Basham, an analyst at Standard & Poor's equity research group. "The company is going public at the top of the cycle for both advertising growth and radio station valuations." He contends that a market capitalization of $12 billion or $13 billion, the equivalent of about $15 a share, is more appropriate.
Jennifer McBrien, an analyst with Renaissance Capital Corp. in Greenwich, Conn., said CBS hopes Infinity will fetch such a high price that it will help lift CBS shares, whose 5% gain this year lags far behind the 22% of the Standard & Poor's 500-stock index and the 39% for the S&P broadcast media index.
Selling part of a profitable subsidiary is the same tactic used by News Corp. last month when it sold a small stake of Fox Entertainment Group Inc. in what was the third-largest IPO by a U.S. company. Merrill Lynch & Co., which is handling the Infinity sale, also managed the sale for Fox.
Potential investors may overlook Infinity's apparently steep price because it is a healthy business run by a highly regarded manager, said Mel Karmazin, 55, who would also continue as chief executive of CBS.
Infinity owns 161 radio stations in 34 markets. Its stations, which rank first or second in 28 of those markets, accounted for 11% of all radio advertising revenue in the U.S. last year.
Infinity also owns TDI Worldwide Inc., one of the largest outdoor advertising companies in the U.S. Taking advantage of regulatory changes that make it easier to own more stations in a single market, Infinity bought the 100 radio stations of American Radio Systems Corp. for $2.6 billion last year.
About 94% of Infinity's radio stations are in the 50 largest markets.