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Thursday June 3 2:18 AM ET
Karmazin adds radio, Internet deals
By Richard Morgan
NEW YORK (Variety) - CBS Corp. (NYSE:CBS - news) CEO Mel Karmazin, who last week added the country's largest outdoor advertising company to the ever-expanding CBS empire, continued his buying spree Wednesday with a billion-dollar foray into radio and cyberspace.
The radio deal, valued at $900 million, calls for Metro Networks, the largest U.S. provider of traffic-reporting services and local news, to merge into CBS-controlled-and-managed Westwood One, the nation's largest radio network.
On the Internet, CBS acquired a 35 percent stake in Switchboard Inc. -- an online directory with more than 117 million listings -- in exchange for a promo-and-branding package valued at $135 million.
One Wall Street observer called the deals ''business as usual'' for Karmazin, whose radio background positions him to exploit cross-promotion and cross-programming opportunities, and whose interest in the Internet already has produced deals with Hollywood.com, StoreRunner.com and Office.com.
''Expect more of these,'' the Wall Streeter said, ''especially on the Internet, where CBS can pick up its equity stake by unloading inventory.''
The deal with Switchboard, which already can be accessed as CBS.Switchboard.com, fits the pattern perfectly in that, for its 35 percent stake, CBS essentially is providing $135 million in advertising over the next seven to 10 years.
The online telephone directory, to be renamed CBS Switchboard, will benefit from placements on CBS' television properties, as well as from radio and outdoor exposure via the net-controlled Infinity Broadcasting Corp. (NYSE:INF - news)
In addition to its equity stake, CBS will receive warrants for an additional 5 percent of Switchboard, as well as warrants to purchase 250,000 shares of Switchboard parent Banyan Systems Inc. (Nasdaq:BNYN - news)
CBS also will be able to add the company's ads and e-commerce services to packages put together for clients by CBS Plus, the cross-media sales group.
''Today we're continuing our expansion in the realm of new media, where our company's assets in promotion, branding and advertising sales provide key strengths to each Internet partnership we create,'' Karmazin said.
In addition to locating individuals and businesses, Switchboard provides online access to maps and provides driving directions.
''As partners,'' said Switchboard president Dean Polnerow, ''CBS and Switchboard have all of the key ingredients needed to become a major player on the Internet: media strength, established brands, local businesses, online consumers and the technology to bring it all together.''
Infinity's deal to merge Metro Networks into Westwood One was more traditional than Switchback's in that it will deliver 1 1/2 Westwood One shares for every Metro share tendered.
Thus Westwood will issue 26 million shares in a transaction that is valued, based on a $35 stock price, at $900 million.
Infinity manages Westwood One and owns 5 million shares of the radio network, America's largest by virtue of its 150 news, sports, music, talk and entertainment programs, features, live events, 24-hour formats and Shadow Broadcast Services.
Metro is the largest provider of traffic-reporting services, operating in more than 80 markets, and is a leading supplier of local news, sports, weather and video news services to television and radio outlets.
It was Metro Traffic that interested Westwood most, no doubt, prompting Karmazin to remark, ''The resources of the combined traffic operations of the merged company will enable Westwood One to invest in improved local content and information-gathering systems, as well as develop new markets for its content from both its existing and future distribution systems.''
CBS stock held steady on the news Wednesday, closing at $42.75 a share, while Infinity declined 44'' to close at $24.94 and Westwood One gave up 12'' to close at $34.88.
Reuters/Variety |
