Radio One buys Atlanta outlet controlled by its chief executive

Outside expert found no conflict of interest in $35 million deal

October 21, 2004|By Andrea K. Walker | Andrea K. Walker,SUN STAFF

Radio One Inc., the Lanham broadcaster, announced yesterday that it has purchased an Atlanta radio company controlled by its own chief executive. Radio One said an outside expert determined the $35 million deal presented no conflict of interest.

Radio One CEO Alfred C. Liggins III is the majority shareholder of New Mableton Broadcasting Corp. New Mableton owns WAMJ-FM, a station in the Atlanta market. Radio One has operated the station under a local management agreement since 2001.

Radio One didn't return calls yesterday, but in a statement said that BNY Capital Markets Inc., a subsidiary of the Bank of New York Co., issued an opinion saying the deal is fair. BNY Capital would not release the opinion.

The acquisition was approved by an independent committee of Radio One's board of directors.

Liggins said in a statement that the acquisition helps Radio One, which owns 69 stations in 22 markets, strengthen its position in the Atlanta market, where it already owns three. Radio One is the nation's largest radio broadcaster targeting an African-American audience.

Force in Atlanta

"Consummating this acquisition helps lock down Radio One's ownership and provides certainty that we will continue to be a force in the Atlanta radio market for years to come," said Liggins, whose mother, Catherine L. Hughes, founded the company in 1980.

Radio One stock closed up 2 cents to $14.15 yesterday on the Nasdaq stock market.

Conflict-of-interest questions are often raised when a company does business with its own executives. This week, First Mariner Bancorp. announced an agreement to buy its Canton headquarters building from CEO Edwin F. Hale Sr. for $20 million.

"If you're buying something from a friend and if you're not using your own money, there is the potential that you might overpay," said Michael R. Vetsuypens, a professor of finance at the Edwin L. Cox School of Business at Southern Methodist University.

"You might not do as good a job of due diligence as you would if the seller was unaffiliated."

Jason Helfstein, executive director of equity research for CIBC World Markets in New York, which follows Radio One, said that when the deal was first announced in April, some investors had concerns that Liggins could charge the company too much money.

After an analysis by CIBC, Helfstein said he determined that the price was fair.

"Anytime you have the management of a company having any kind of separate entity on the side, that could create a conflict," Helfstein said. "Many times it doesn't. Sometimes the conflict is neutral and sometimes the conflict is bad."

Eases concerns

Helfstein said that by selling the suburban Atlanta company to Radio One, Liggins helped to alleviate perceived conflicts of interest that existed when he owned the company.

The price of the deal fell between recent prices Radio One has paid for other major market outlets as part of an expansion plan.

Last month, it completed a deal to buy KRTS-FM in the Houston area for $72.5 million. In July, it announced it would buy WABZ-FM in Charlotte, N.C., for $11.5 million from Susquehanna Radio Corp.

During the summer of 2001, the company acquired 15 stations in the Midwest when it bought Blue Chip Broadcasting Inc.

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