The transaction is subject to FCC and other customary regulatory approvals and closing conditions. The Company expects that the deal will close in the second quarter of 2015.
The agreement includes fifteen radio stations in the Atlanta, Denver, Miami and San Diego markets, and it will expand Entercom’s station portfolio to more than 130 stations in 26 markets.
"We are pleased to reach an agreement with Entercom Communications to sell Lincoln Financial Media," added Dennis R. Glass, president and CEO of Lincoln Financial Group. "Not only will this transaction allow Lincoln Financial Media to align itself with a well-respected media organization, but it also enables Lincoln Financial Group to focus on its strategy to grow its core lines of business."
The transaction is structured as an acquisition of the stock of LFM with a tax election that allows Entercom to receive a step-up in the tax basis of the station tangible and intangible assets providing additional future tax shields and enhancing future free cash flow.
The $105 million purchase price will be paid in the form of $77.5 million in cash and $27.5 million in new perpetual cumulative convertible preferred stock that will be issued to Lincoln. Entercom expects to finance the cash portion of the purchase price through a combination of its existing $50 million revolver, cash on hand, and through other financing sources, if necessary.
The convertible preferred stock will not count as debt under the Company’s debt agreements. With the use of convertible preferred stock and adjustments for pro forma cost savings reasonably expected, the transaction will have minimal impact on the Company’s leverage as defined under its credit agreement. Entercom anticipates that it will begin operating the LFM stations under a time brokerage agreement which is expected to commence in late January following the usual Justice Department regulatory review. In order to comply with the FCC’s station ownership limitations, the Company plans to divest one FM station in the Denver market.