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Infinity goes Outdoor
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May 27, 1999: 1:41 p.m. ET
Broadcaster buys billboard advertiser for $6.5B in stock, $1.8B in debt
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NEW YORK (CNNfn) - Infinity Broadcasting Corp., the radio affiliate of CBS Corp., said Thursday it is buying the billboard advertising company Outdoor Systems Corp. for $6.5 billion in stock and an additional $1.8 billion in assumed debt.
Under terms of the agreement, Infinity (INF) will swap 1.25 shares of its Class A common stock for each share of Outdoor Systems (OSI). Based on Infinity's $26 closing price on Wednesday, the deal values Outdoor Systems at $32.50 -- a 13 percent premium from its Wednesday close.
However, the value of the deal can change if the stock price fluctuates, Infinity said.
The agreement comes as radio companies move increasingly toward consolidation to save costs and compete more effectively. Having outdoor billboard interests allows them to grab advertising accounts seeking to reach a bigger audience than only those who tune in to radio.
"We're most excited about the revenue opportunities," Infinity chief executive Mel Karmazin said during a conference call to analysts following the announcement. As advertising over the airwaves and on the Internet becomes more global, Karmazin said, Infinity will be better able to compete - especially with international clients looking for cost-effective ways to advertise.
Infinity currently operates more than 160 radio stations and TDI, its own outdoor advertising business. TDI has some 2,000 billboard displays and more than 1 million transit displays worldwide.
Outdoor Systems is the No. 1 outdoor billboard company in the U.S. It owns and manages 112,000 bulletin, poster, mall and transit displays and has an additional 125,000 in the New York City transit system.
Karmazin also said that the combined revenue and cost savings of the new company should allow it to eliminate the outstanding debt it's inheriting from Outdoor Systems within a year. Infinity has very little debt itself, after taking in around $2.8 billion in equity this past winter when it branched out as a separate publicly traded entity.
Neither Karmazin or Outdoor Systems CEO Arte Moreno expect any opposition to the agreement, which should be completed by the end of this year. The deal requires approval from shareholders of both companies and from regulators.
The deal gives Infinity a new competitive position with other industry leaders, particularly as those companies join forces to broaden their interests and gain market share both in the advertising and communications worlds.
Clear Channel Communications Inc. (CCU) last October purchased rival Jacor Communications (JCOR) in a deal valued at $4.4 billion, including the assumption of debt. Chancellor Media Corp. (AMFM), another big radio company, has announced a $4.1 billion merger with Capstar Broadcasting Corp. (CRB)
CBS (CBS), the parent of Infinity, has indicated it will vote its interest - representing 95.8 percent of the company's outstanding stock - in support of the merger.
Once the transaction is completed, Outdoor Systems will become a wholly owned subsidiary of Infinity.
Shares of Infinity fell 5/8 to 25-3/8 in mid-afternoon New York trading. Outdoor Systems rose 1 to 29-13/16. 
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