Citadel Broadcasting Corp. has received antitrust approval to acquire industry rival ABC Radio from Walt Disney Co., U.S. Federal Trade Commission announced on Monday.
Antitrust authorities have completed their review of the $2.7 billion deal, which would create the industry’s third-largest radio group, without taking any action to block it, the FTC said in a notice posted on its Web site.
Citadel agreed to buy the bulk of Walt Disney Co.’s radio assets for about $2.7 billion in a deal structured to make the transaction tax-free for Disney shareholders.
The agreement, which is expected to close by the end of the year, includes ABC Radio’s 22 radio stations in nine major markets, such as L.A.’s KLOS-FM (95.5) and KABC-AM (790), and ABC Radio Networks, which distributes programming to more than 4,000 affiliates.
Following the completion of the merger, Disney shareholders will own approximately 52 percent of Citadel; Citadel shareholders will own the remaining 48 percent of the combined company.
Disney will retain $1.40 billion to $1.65 billion in cash, depending on the market price of Citadel Broadcasting at the time of closing. Citadel had 2005 revenue of approximately $575 million and operating income of about $200 million, the companies said.
Farid Suleman, Citadel’s chief executive, will head the new company. Suleman formerly was the chief executive of Infinity Broadcasting.
After the transaction, Citadel will comprise 177 FM stations and 66 AM stations, in addition to the ABC Radio Networks.
The Burbank-based entertainment giant’s Radio Disney and ESPN brands and networks were not part of the deal.
Las Vegas-based Citadel, a radio broadcaster majority-owned by private equity firm Forstmann Little & Co., has been active in the ABC Radio negotiations for months. By acquiring Disney stations, Citadel will likely increase investor interest in its stock and give its shareholders greater liquidity.
After Disney put the business up for sale last year, Citadel ended up in a face-off with bigger rival Entercom Communications Corp. Citadel, which owns more than 200 stations in 47 markets nationwide and has a market value of about $1.4 billion, emerged as the exclusive bidder for Disney’s radio assets at the end of January.
Disney said in January that it wanted to structure the deal as a reverse Morris Trust to make it tax-efficient, meaning the ABC Radio assets would be split off and then merged into Citadel, giving Disney shareholders ownership of at least half of the new company.
Disney decided to consider a sale after the appointment of Robert Iger as the new chief executive, which prompted a review of all the media group’s assets.
