Westinghouse-Infinity deal shows radio is hot again Deregulation has allowed firms to own more stations



NEW YORK -- Westinghouse Electric Corp.'s planned $3.9 billion purchase of Infinity Broadcasting Corp. confirms what savvy investors have known for months: Radio's hot again.

Once considered a stunted stepchild to 500-channel cable television, radio stations have soared in value this year in the wake of a telecommunications deregulation law that lets big companies own double the number of stations in major U.S. markets.

That's sparked a boom in acquisitions -- and in the stock prices of companies that are doing the buying.

While the cable-dominated Standard & Poor's Broadcast Media index has dropped 13 percent this year, shares in many radio station operators are up 30 percent or more this year.

"The larger companies are just getting larger. The industry is consolidating into the hands of several large companies," said analyst Paul Sweeney of Salomon Bros. Inc.

Investors say they expect the acquisition frenzy to last for a couple of years.

"Two years from now, the most attractive properties will be cherry-picked away," said Daniel Dent, president of D. F. Dent & Co., which owns media stocks including Baltimore-based Sinclair Broadcast Group Inc. and Clear Channel Communications Inc.

Infinity, the nation's No. 2 radio company, actually has been among the industry's laggards, rising just 18 percent this year -- even taking into consideration Westinghouse's offer of $32.28 a share in stock.

Stronger performers include Clear Channel, whose shares were trading at more than double its January price of $41; and Texas-based Evergreen Media Corp., which is up 36 percent this year.

Other companies with significant radio holdings include Jacor Communications Inc., up 54 percent this year; SFX Broadcasting Inc., up 28 percent; and Chancellor Corp., up 24 percent since going public in February.

Thank deregulation for the surge. By allowing media companies to own as many as eight radio stations in markets where there are at least 45 stations, Congress increased the incentive for corporations to amass large portfolios of stations.

Clustering stations, or buying stations in markets where companies already have a presence, is becoming the key to broadcasters' growth, analysts say. By increasing market concentration, especially in large urban areas, companies can raise ad rates and trim programming costs.

"Consolidators in particular markets can hold the advertising rates firmer by buying out the weaker players who perhaps were undercutting rates," Sweeney said.

Prices for radio companies usually run from 10 times to 15 times annual cash flow, analysts say. Over the last several months, however, the average has been moving closer to 15, Sweeney said.

Investors love radio for many reasons. Radio entrepreneurs responded to the threat of cable TV by becoming an outdoor form of entertainment and advertising, targeting commuters in cars with jazz, country music, rock, sports and controversial talk-show hosts.

As the industry is reshaping, investors can make money betting on aggressive buyers or on takeover targets, analysts say.

Clear Channel may be the best illustration of that. The San Antonio-based company has been one of the industry's most fervent buyers, acquiring four smaller radio companies in the month after telecommunications deregulation was signed into law.

Recent purchases included closely held Radio Equity Partners, with 19 stations, for $235 million; and Heftel Broadcasting Corp., the nation's largest Spanish-language radio broadcaster, for $218 million.

Pub Date: 6/30/96

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