Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

$15.9M Radio Purchase Will Attract Advertisers

LOS ANGELES -- Marking the largest radio acquisition in history and the continued consolidation of the industry, Clear Channel Communications Inc., the United States' third largest radio operator, agreed Monday to buy the leader, AMFM Inc., in a stock deal valued at $15.9 billion.

The transaction, which has been widely anticipated since January, will transform the Dallas-based Clear Channel into one of the nation's largest outlets for advertisers, with 830 radio stations, 425,000 billboards, 19 television stations and Katz Media, a company that represents various electronic media.

The combined companies will take in more than $5 billion in advertising - about the same amount as News Corp. and the Walt Disney Co., but half as much as Viacom Corp., after its proposed acquisition of CBS is completed.

If the deal is approved by regulators and shareholders, Clear Channel would be catapulted to the top of the radio industry, generating twice as much cash from its stations as the next largest company, CBS's Infinity Broadcasting.

The deal underscores a trend among media companies toward offering advertisers packages of commercial space across multiple outlets. Infinity, for instance, is drawing in new advertisers, expanding the overall spending and securing higher rates through a plan that offers advertisers a combination of radio, billboard, Internet and television time.

Its parent company, CBS, intends to add cable channels and additional television stations to the mix through the Viacom merger.

"CBS and Viacom are trying to use MTV and the CBS network to leverage the national advertiser," said James Marsh, a broadcast analyst at Prudential Securities. "Clear Channel's strength is their strong local franchises."

Analysts said Clear Channel is riding the boom in what the industry refers to as "out-of-home" advertising, as industry consolidation has allowed radio and billboard operators to compete more effectively with television and newspapers for local dollars.

By amassing multiple outlets in a market, companies such as Infinity and Clear Channel are not only giving advertisers comparable reach of a newspaper, but offering to break through the clutter of "in-home" messages resulting from a proliferation of cable channels, broadcast networks and local television stations.

Analysts said buying AMFM will also enable Clear Channel to tap into the Internet advertising boom. While Clear Channel's radio stations are mostly in midsized markets, AMFM's are predominantly in the top 10 cities, where advertising is mushrooming.

James Marsh, a broadcast analyst at Prudential Securities estimates that radio advertising will be up as much as 9 percent this year, largely as a result of new spending by Internet companies - outpacing historic growth of about 5 percent.

He estimates that 50 percent of the projected $900 million in Internet advertising is targeting radio and an additional 30 percent is flowing to billboard operators. Television stations make up the rest.

The radio industry has undergone a radical consolidation since Congress relaxed ownership limits in 1996 in an effort to help the industry better compete more effectively for local advertising dollars against newspapers and a rising number of television stations and national networks.

Three years ago, no single radio group controlled more than 30 stations. Today, the top five operators each control more than 100 stations.