Option: CBS Radio Could Go It Alone

As CBS Corp. explores strategic options to separate its radio broadcasting business, one option under consideration is filing for an Initial Public Offering for the radio unit as its own publicly traded company.

According to InsideRadio, a first step might be to lever up the company somewhat to give it the right capital structure before shares are offered to the public. CBS might own a controlling stake in the separate company or it could get private equity partners involved. Remaining shares could be distributed to shareholders in a special dividend or through an offer to exchange one share of CBS stock for two of the radio company.

Mark Fratick

Such a maneuver may put the CBS Radio portfolio in a better position to grow through station acquisitions. As it stands now, the radio division competes for capital for investments within the larger CBS Corp., which is intently focused on higher growth areas. For example, if the CBS Radio cluster in St. Louis wanted capital to buy another station in the market, it might compete for funding with a new show CBS wants to launch on Showtime’s over-the-top streaming service. InsideRadio opines the bean counters would ultimately weigh which investment would produce a better return.

With its own balance sheet and capital structure, a separate CBS Radio could focus on growing and expanding its radio assets.

That CBS is evaluating its radio options shouldn’t be seen as a knock against the medium, BIA Kelsey chief economist Mark Fratrik says. “It’s a natural evolution,” he says. “Radio is still a very important player with a very prominent position in the local marketplace. People enter and exit industries all the time.”