What’s Next for CBS Radio?
CBS Radio has now filed paperwork with the Securities and Exchange Commission for an initial public offering. We asked experts what happens next.
CBS Radio sent a nominal fundraising target of $100 million in its SEC filing. Left blank were spaces for how many shares the company intends to sell and their expected price.
The underwriters were also not named. The filing doesn’t reveal how much debt the company would incur, but does say it intends to distribute the pre-offering proceeds to corporate and nothing would be available for operating the radio division.
CBS Corporation intends to dispose of all the shares of the common stock it will own indirectly after the offering and intends to conduct a tax-free split-off, meaning CBS Corp. would offer its shareholders the option to exchange those shares for CBS Radio shares. If not all radio shares are exchanged, the remaining shares may be offered in a subsequent exchange offering.
“If CBS does not proceed with the split-off, it could elect to dispose of our common stock in a number of different types of transactions, including open market sales, sales to one or more third parties or pro rata distributions of our shares to CBS’s stockholders or a combination of these transactions. CBS could also elect not to dispose of our common stock. The determination of whether, when and how to proceed with the separation is entirely within the discretion of CBS.”
One broker tells us the initial opening price is probably a placeholder. “They’ll speak with the bank, value the assets” and set a price, he tells RBR+TVBR in an interview.
Company executives have said they are exploring various “strategic alternatives” for the radio division. Though a sale is still possible, the tax consequences are “so prohibitive” that path is unlikely.
As for the timing of an IPO, “CBS went out, saw the marketplace” and now “I think [CBS Corporation Chair/CEO] Les Moonves has decided ‘We’ll get what we can’” for the 117 station group “because the stations will be worth more now than six months from now,” another broker told us in an interview.
“They want out and tried it on a private basis. I’ve never seen many buyers robustly bid in a buyer’s market, and that’s what we have in radio” now, he said, also referring to our report last week that radio M&A in the latest quarter reached $47.8 million, the lowest deal volume in a quarter in 34 years, according to SNL Kagan.
As for risk, CBS Radio said in its SEC filing: “An active trading market for our common stock may not develop following this offering, and you may be unable to sell your stock at a price above the initial public offering price or at all.”
According to The Wall Street Journal CBS Radio lost $136 million in 2015 and its revenue declined 6% to $1.23 billion that year with 75% of revenue coming from local advertisers and 25% from national.