BREAKFAST WITH THE FOOL
Monday, October 4, 1999
"October. This is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August, and February."
-- Mark Twain
Big U.S. Radio Companies Get Bigger
Richard McCaffery (TMF Gibson)
Radio giants Clear Channel Communications (NYSE: CCU) and AMFM (NYSE: AFM) have reached a $23.5 billion merger agreement that will create the world's largest away-from-home media company.
Once completed, the new company will have operations in 32 countries, including about 830 radio stations, more than 425,000 outdoor advertising displays, and 19 television stations. AMFM shareholders will own 37% of the new company with Clear Channel shareholders controlling the other 63%.
Under the agreement, AMFM shareholders will receive 0.94 shares of Clear Channel for every share of AMFM, and Clear Channel will assume $6.1 billion of AMFM debt. It is expected that the merged companies will have to divest about 125 radio stations to gain regulatory approval for the deal.
As competition among broadcast television, cable, and Internet companies in the home has increased, Clear Channel has worked to position itself as the dominant media company in the out-of-home market, which comprises the radio and billboard industries.
The company's strategy has been all about adding distribution channels for its advertisers. Founded in 1974, the San Antonio, Texas firm accelerated its growth as commuting time for the average American increased. By merging with AMFM -- the 800-pound gorilla of the radio industry -- Clear Channel obtains access to about 443 radio stations in 100 markets. The company's radio stations reach 64 million listeners a week.
In addition, AMFM has worked to build an online presence through its e-commerce websites. The sites offer streaming broadcasts of AMFM's radio shows and other media.
News to Go
The U.S. telecommunications industry is again swirling with takeover talk. This round has BellSouth (NYSE: BLS) making a $72 billion bid for Sprint (NYSE: FON) even as MCI WorldCom (Nasdaq: WCOM) and Sprint move closer to an agreement, The Wall Street Journal reported. The Journal's sources have Sprint going with MCI even though the Bell deal is reportedly higher.
Long distance phone company and cable heavy AT&T (NYSE: T) is considering issuing tracking stocks to allow investors to closely follow its wireless, cable and Internet, and business outsourcing units, The Wall Street Journal reported.
Vulcan Ventures, the investment vehicle founded by Microsoft (Nasdaq: MSFT) cofounder Paul Allen, has formed a joint venture with four of its companies called Broadband Partners, which will initially offer broadband services to customers of Charter Communications and communications provider RCN (Nasdaq: RCNC).
Pulp, paper, and paper products manufacturer Westvaco (NYSE: W) plans to eliminate about 300 jobs and take an $85 million pretax charge against earnings in Q4 as part of a move to improve performance.
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