Tampa Bay radio market's biggest players to merge

Clear Channel will pay about $4.4-billion for rival Jacor. Seven stations must be sold.

By KRIS HUNDLEY

© St. Petersburg Times, published October 9, 1998

lear Channel Communications Inc., the nation's second-largest radio company, doubled its size Thursday by agreeing to buy rival Jacor Communications Inc. for about $4.4-billion in stock and assumed debt.

From the Web Clear Channel Communications home page Jacor Communications home page Times 50 Online -- top companies in Tampa Bay

The deal combines the two biggest players in the Tampa Bay radio market. And it apparently means that at least seven local stations will have to be sold to satisfy antitrust regulations.

San Antonio, Texas-based Clear Channel owns eight stations in the Tampa Bay area, while Cincinnati-based Jacor has seven.

Clear Channel, which has a reputation for conservative, buttoned-down programing, owns WSJT 94.1 "smooth jazz" and WFJO-FM 101.5 "jammin' oldies," among others locally.

Jacor, whose corporate slogan is "The noise you can't ignore," blasts local airwaves with Bubba the Love Sponge's show on WXTB-FM 97.9 as well as controversial talk show hosts like Mark Larson on WFLA-AM 970.

Because the Federal Communications Commission limits operators to five FM and three AM stations in a market, it appears Clear Channel will have to sell or swap at least five local FM stations and two AM stations. Tampa is the largest of five markets where the merged companies will be forced to sell or swap stations.

Information on which stations might be sold was not available Thursday, and industry experts said it was unlikely such details would become clear until the deal is finalized in September 1999.

Before divesting some of its local stations, the Clear Channel-Jacor combination also grabs the lion's share of local radio ad revenues, with nearly 63 percent. By selling or swapping stations, Clear Channel is expected to reduce that to 40 percent, the informal limit set by the Department of Justice, which must sign off on the acquisition.

Clear Channel's bid for Jacor will more than double its number of stations nationally to 454. It also continues the rapid consolidation in the radio industry, which began in 1996 when the federal Telecommunications Act raised the allowable limits on station ownership.

Though big radio operators assured the FTC that consolidation would not result in a uniformity of programing, a glance at the local offerings of the Jacor and Clear Channel stations shows considerable overlap. Both have sports, talk, oldies and rock stations.

Thom Moon, director of operations at Duncan's American Radio, a Cincinnati research firm, said publicly traded radio companies are eager to keep investors happy and don't want to take chances with programing that might not work.

"One of the things broadcasters said was going to happen was more experimentation, and sadly that has not been the case," he said. "There's a lot of homogeneity in programing and I don't see that changing any time in the near future."

The largest radio station owner, Chancellor-Media Corp., will have 463 stations after it completes its $4.1-billion purchase of Capstar Broadcasting Corp., which was announced in August.

Clear Channel plans to issue 1.4 shares for each Jacor share. Based on Thursday's closing stock prices, Clear Channel is paying $51.80 a share for Jacor, or a 29 percent premium. Analysts said the price was in line with similar acquisitions.

Clear Channel is betting the move will help it boost revenue growth as more advertisers turn to radio instead of television in a slowing economy. Radio industry advertising is expected to rise 10 percent a year for the next five years, analysts said.

"Radio will grow faster than the overall ad market. This makes sense for Clear Channel," said Niraj Gupta, an analyst at Schroder & Co.

Clear Channel said Jacor will operate as a separate unit. Moon of Duncan's American Radio thinks that's a smart move.

"Clear Channel has brilliant managerial, financial and business sense and I think they're looking to Jacor to put some fire into their programing," he said. "The only possible fly in the ointment is how well the two corporate cultures can co-exist."

Moon and others interviewed Thursday said it was unlikely listeners would notice an immediate difference. Nor is it clear who might step forward to buy Clear Channel's Tampa Bay stations or swap them for stations in markets where Clear Channel has not yet reached the FCC's limit.

But the list of potential buyers/swappers is short, thanks to a flurry of mergers that has left just a handful of major radio operators.

Four companies -- Jacor, Clear Channel, CBS and Cox Communications -- already control 95.3 percent of the local market's radio ad revenues. Cox and CBS, eager to add to their local holdings, are among the most likely bidders for some of Jacor's or Clear Channel's Tampa stations.

Jack Messmer, senior editor of Radio Business Report, a trade journal, said it's also possible that Entercom, which is in the process of trading two local stations to CBS for two Boston stations, may re-enter the Tampa market.

"Entercom didn't really want to leave Tampa," said Messmer. "So they may try to pick up the Jacor-Clear Channel stations as a package. If anything, Tampa's most likely to get a new big player just because of the size of the group of stations that has to be spun off."

Messmer said radio companies typically prefer to swap stations with competitors, rather than sell them, because of the limited number of stations available. "They also try to trade their weakest station, but sometimes they have to trade good properties," he said.

Clear Channel's shares were down 371/2 cents Thursday, to close at $36.621/2. Jacor's shares closed at $40.561/4, up 433/4 cents.
-- Information from Times wires was used in this report.