NEW YORK (CNNfn) - Infinity Broadcasting Corp., the No. 1 U.S. radio station operator, agreed Tuesday to accept a revised $12.36 billion all-stock buyout from media conglomerate Viacom Inc., aiming to reunite the broadcasting company of Howard Stern with its one-time parent, CBS.|
The agreement, reached and unanimously approved by the boards of both companies, comes more than two months after the New York-based Viacom first offered to purchase all of Infinity's Class A common stock.
Since that time, the stocks of both companies have been caught in the downdraft on Wall Street, shaving more than $3 billion off the merger's enterprise value. However, the agreement reached Tuesday represents a slightly higher share-swap ratio to help compensate Infinity shareholders.
Still, analysts have largely supported the transaction because it offered Infinity (INF: Research, Estimates) shareholders a higher-valued stock while giving Viacom (VIA.B: Research, Estimates) -- operator of a global media empire constructed by its chairman, Sumner Redstone, and former CBS Corp. Chairman Mel Karmazin -- more than $1 billion a year in free cash flow.
"There could be no better time to fully integrate Infinity with Viacom's tremendous portfolio of assets," said Karmazin, who now serves as Viacom's president and chief executive officer. "Infinity is performing at record levels and continues to generate a tremendous amount of free cash flow that will now fully benefit Viacom."
The merger represents a homecoming of sorts for Karmazin, who helped build Infinity from a three-station holding company into a dominant national force during the 1980s and early 1990s before it was purchased by Westinghouse Electric, which later changed its name to CBS Corp.
CBS spun Infinity off two years ago in a public offering worth more than $3 billion. When Redwood's Viacom purchased CBS for nearly $40 billion earlier this year, it assumed ownership of 100 percent of Infinity's Class B common stock, representing 64.3 percent of the company's equity and 90 percent of the combined voting power of its Class A and Class B stock.
Infinity owns and operates 187 radio stations nationwide and also ranks as the No. 1 outdoor advertising company in North America. The company's radio formats range from country to rock to the antics of controversial talk radio hosts Howard Stern and Don Imus. The company also owns a more than 15 percent stake in Westwood One, the No. 1 U.S. syndicated radio network.
The merger agreement reached Tuesday calls for Viacom to exchange 0.592 share of its stock for each outstanding Infinity Class A share. That ratio values the company at $31.93 per share, or a 4.7 percent premium over its closing price Monday.
When the transaction was first announced, Viacom was offering 0.564 of a share for each Infinity share, a ratio that offered Infinity shareholders a nearly 14 percent premium.
The companies hope to complete the transaction during the first quarter of next year
Viacom's widely traded Class B shares fell $1.25 to $54.31 in early trading Tuesday while Infinity gained $1 to $31.50.