Founded In Philly, 'CBS Radio' Returns As Entercom

Ninety years after broadcaster William Paley took over Philadelphia’s WCAU radio station and used it to start the giant Columbia Broadcasting System networks, CBS is folding its radio group into Entercom Communications Corp., the Bala Cynwyd chain founded in 1968 by chairman Joseph M. Field and run by his Wharton-educated son, David J. Field.

According to philly.com, the combined companies, which will be known as Entercom, will be the second-largest U.S. radio station group, with 244 stations in large and midsized metro markets, grossing $1.7 billion in ads and other revenue a year. That trails only iHeartMedia, with 862 mostly smaller-market stations bringing in $2.6 billion last year, according to the industry analyst BIA/Kelsey.

Entercom shares rose on the news and briefly traded above $16.50, a 10-year high. Entercom went public in 1998 at $22.50 a share. Shares topped $60 in the telecom boom that ended in 2001, then slipped below $1 in the 2008 recession, and have remained mostly in the $5 to $15 range since then, as audio investors moved on to such digital platforms as Pandora and Spotify.

Though the partners own almost equal numbers of stations, CBS, with multiple outlets in New York, Chicago, and other large markets, has nearly triple Entercom’s sales, and its investors, including mutual funds, will hold 72 percent of the combination under a tax-free arrangement.

But from a managing perspective, Entercom is the acquirer. The joint company will be run by David Field, the headquarters will be at Entercom’s Bala Cynwyd offices, and Entercom investors will fill five of the nine board seats in the combined company, if the deal closes as planned later this year.

Radio chains such as Entercom and CBS have lost value as more Americans get their music from digital and internet platforms. But Field said his company still sees opportunity: “Radio reaches more Americans than any other medium, and offers advertisers outstanding" returns and local customer reach.

Field said the merger would allow for cost savings. Both companies own stations in Atlanta, Miami, Los Angeles, San Francisco, and Seattle, among other markets.

CBS’s Philadelphia stations include KYW (news), WIP (sports), WPHT (talk), WXTU (country), WOGL (“classic hits”), and WTDY (Top 40). Entercom owns stations in Boston, Denver, Miami, San Francisco, and more than 20 other metro markets. It also owns five stations in the Wilkes-Barre market but has not operated in Philadelphia.

From Entercom website

In a business often run by loud impresarios, the Fields “have been flying under the radar for a while,” said Philadelphia radio veteran Steve Martorano, who runs Recovery Radio, a sponsored show on WPHT.

CBS boss Les Moonves had hoped to spin off the stations as an independent company, but recent deals such as last summer’s purchase of Massachusetts-based Greater Media Inc. by Florida’s Beasley Broadcast Group for just $240 million — a price Martorano said might have bought a single ad-rich station such as Philadelphia rocker WMMR in its 1990s heyday — discouraged plans to sell to the public in an initial public stock offering (IPO).

He noted that CBS founder Paley is supposed to have bought WCAU after noting the rising advertising bills his father’s cigar company was paying the station to reach smokers, and built up his radio — and later television — network from that beginning.

CBS, one half of Sumner Redstone’s family media empire, has been looking to get out of the terrestrial radio business for at least the past year, with listeners fleeing and advertising revenue in a tailspin amid tough online competition from Pandora and Spotify. The CBS TV network under Leslie Moonves is much more profitable, still the most-watched in the U.S. After striking out with potential buyers, the company pursued an IPO, similar to what it did with its outdoor segment. That effort also came up short.

According to Bloomberg, the deal with Entercom gives CBS a way out using a Reverse Morris Trust, a tax-free transaction in which one company merges with a spun-off subsidiary, according to a statement Thursday. CBS shareholders will receive 105 million Entercom shares, valued at more than $1.6 billion currently, and own 72 percent of the combined company, while Entercom holders will get 28 percent. Entercom will be the surviving public company.

Shares of CBS were little changed at 11:00 a.m. in New York Thursday after rising as much as 1.2 percent to $65.35. Entercom soared as much 17 percent to $16.55.