The news that CBS Corporation plans to file the paperwork later this month for a possible Initial Public Offering didn’t surprise experts RBR+TVBR spoke with. Here’s why they believe the move makes sense.
The statement to the SEC in a filing about the sale of senior notes (see other story) included this phrase: “In connection with these strategic options, the Company expects that CBS Radio will file a registration statement on Form S-1 with the SEC during July 2016 relating to an initial public offering of shares of common stock of CBS Radio.”
The company began with radio stations in 1927 and now has 117 in 26 markets. Many are heritage signals, even “beachfront property” as one broker characterized them to us Wednesday.
The move comes four months after CBS Chair/CEO Leslie Moonves said the company planned to separate the radio division, and was exploring “strategic options” that could include a sale, swap or spin.
Moonves reiterated to investors in May the radio business is still “a good business” however it’s “slow growth” in he “low-to-single digits” doesn’t fit the profile of the rest of the company.
We reported in early May the company was completing an audit of the radio assets in preparation for a June-July SEC filing related to an IPO. He said if the company could make a sale work without incurring a huge tax liability, it would.
But the fact that the company has owned its radio stations for so long almost means an IPO is inevitable to avoid triggering “a taxable event” experts tell us. The benefits mean CBS Corporation “can un-couple themselves from a slow-growth business,” said one broker, while noting that “CBS Radio generates cash flow.”
CBS would remain a majority shareholder, at least initially, in the split-off radio company, “freeing up the radio division from some financial constraints.”
Another broker agreed that having a buyer show up quickly was “unlikely” and a separation will be good for the radio stations, with the separated radio entity getting “a fresh, clean balance sheet and then can begin to acquire or divest without the tax issues and the burden of the present structure.”
