A CBS Radio IPO was filed with U.S. regulators on Friday. CBS Corp., the company’s parent, decided to cut ties with the flailing AM/FM business after years of shrinking profits.
The initial public offering of $100 million filed with the Securities and Exchange Commission did not outline how many shares will be sold or their price. The money generated from the sale will fund general corporate expenses and other cash needs. CBS Radio will take on debt before the sale and some of the IPO funds will go to parent company CBS.
Rumblings of a spin-off or sale of the radio division began in March. At the time, CEO Leslie Moonves said CBS was looking at different options to “unlock value for our shareholders.”
The recent IPO filing suggests CBS has been unable to find a buyer to take over the struggling radio enterprise.
“As previously announced, the company is exploring strategic options to separate its radio business,” CBS said in its filing. “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.”
In a memo on Friday, CBS Radio president Andre Fernandez reassured employees the company will go on.
“An initial public offering of CBS Radio stock has been and continues to be our primary focus as a step towards separating CBS Radio from CBS Corp. That said, we are continuing to consider other paths to find what we believe will be the best option for unlocking the value of our radio assets for CBS shareholders.”
According to the IPO filing, CBS will use its remaining stock in the radio company to buy back its own shares after the sale completes. In 2014, CBS did something similar with its $3.3 billion outdoor advertising unit, now known as Outfront Media.
Should the IPO not work out, CBS may try to sell its shares to company stockholders, other third parties, or on the open market.
Worth approximately $2.9 billion and operating 117 radio stations, CBS Radio focuses on news, sports, music, and entertainment programs. Founded in 1928, it is one of the oldest radio companies still in existence.
The media giant currently reaches more than 70 million listeners in 26 markets throughout the United States. For years, the radio division was a predictable and steady profit stream for CBS. However, things are different now.
The announcement to spin-off CBS Radio comes at a time when terrestrial stations are struggling against online and satellite competitors. Listeners, who were glued to AM/FM talk shows, have turned to internet radio and podcasts that can be heard anytime and from anywhere.
Tolerating ads when listening to music used to be the norm. Now, consumers can enjoy commercial-free radio and a greater selection of songs for a small subscription fee on platforms like Apple Music.
After writing down the value of licenses, CBS Radio lost nearly $137 million on revenue of $1.2 billion in 2015. The year before, the company brought in $1.3 billion in revenue with a net income of $176 million. Advertising sales have declined one percent to $17.4 billion industry-wide.
CBS intends to rid itself of CBS Radio and explore strategic alternatives. With the elimination of its billboard unit and radio, CBS will effectively reduce its dependence on advertising sales. The media company can now focus on collecting re-transmission fees from pay-TV operators as well as expanding internet video services.
No symbol or exchange has been announced for the new CBS Radio. After the IPO, CBS will still control the radio company by retaining majority voting rights. Share price of the parent company closed at $57.08 at the end of business Friday.
[Photo by: JMA/STAR MAX/IPX/AP Images]