CHANCELLOR HOLDINGS OFFERS TO ACQUIRE SFX BROADCASTING FOR $26 PER SHARE, IN TRANSACTION VALUED AT APPROXIMATELY $160 MILLION; Combination Would Create Nation's Third-Largest Radio-Only Group.

DALLAS--(BUSINESS WIRE)--March 15, 1995--Chancellor Holdings Corp., of Dallas, a privately-held radio broadcasting company, said that it today sent the following letter to Robert Sillerman, Chairman and Chief Executive Officer of SFX Broadcasting, Inc. (NASDAQ: SFXBA):

March 15, 1995 Mr. Robert F. X. Sillerman Chairman and Chief Executive Officer SFX Broadcasting, Inc. 150 East 58th Street New York, NY 10155

Dear Bob:

For some time now, you have been aware of our friendly proposal for a strategic business combination of SFX Broadcasting, Inc. and Chancellor Holdings Corp., in a transaction that would bring together our two outstanding groups of radio stations and operating managers, position the combined company for continued success and growth in the rapidly consolidating radio industry, and deliver significant immediate value to all SFX shareholders. As you also know, my colleagues and I even presented to you on January 23 a specific merger proposal, which, unfortunately, has not resulted in meaningful progress toward the execution of a definitive merger agreement.

Because we believe it is important for both you and your fellow shareholders to know of our strong interest in pursuing an SFX/Chancellor transaction, and because we continue to believe that the transaction we propose represents a very attractive opportunity for your shareholders, we are writing to you and also publicly releasing this letter outlining the general terms of the transaction we have in mind.

What we propose is a business combination in which Chancellor would acquire 100% of the common stock outstanding of SFX in a reverse merger transaction for $26.00 in cash per share of SFX common stock, or approximately $160 million. This offer represents more than a 44% premium over the closing price of SFX stock on January 23, the day we first presented our merger proposal to you; and a premium of 14.3% over SFX's closing price today of $22.75 per share (which we believe reflects rumors of our interest in SFX). Although our current offer is all cash, we would be willing to restructure it to offer up to 60% of the consideration in the form of Chancellor Common Stock, if you would find this attractive.

We have in hand a commitment from Hicks, Muse, Tate & Furst Incorporated for $65 million of equity financing for the transaction, and we are highly confident of our ability to obtain the balance of the necessary financing.

Because we want the combined company to benefit from the expertise of both management groups, we propose a management structure that would include R. Steven Hicks, currently President and Chief Operating Officer of SFX, as Chairman and Co-Chief Executive Officer of the combined company, while I would become President and Co-Chief Executive Officer. We further contemplate that the combined company's Board of Directors would consist of three individuals designated by Chancellor, two individuals (namely, you and Steve Hicks) designated by SFX, and two outside directors.

Since its formation in August 1993, Chancellor, as you know, has established itself as one of the fastest-growing radio groups in the country, having acquired, in separate transactions with Group W and American Media totaling more than $200 million, outstanding radio properties in Cincinnati (3 stations); Sacramento (3); Minneapolis (2); Nassau/Suffolk, New York (2); Riverside/Bernardino, California (2); and Orlando (1). A definitive agreement to acquire an additional FM station in Minneapolis, signed and announced last month, is also currently pending. We believe the combination of Chancellor and SFX would create the third-largest radio-only group in the United States.

Moreover, with the operational expertise of our two companies, we feel the combined Chancellor/SFX would be exceptionally well positioned for continued strong operational performance and rapid growth, as we continue to aggressively pursue attractive radio properties throughout the country and thereby take maximum advantage of the favorable FCC duopoly environment for the benefit of our investors.

A formal merger agreement that describes the transaction we contemplate in detail, and that we are prepared to sign immediately, is being sent to you today under separate cover. I want to emphasize that we are only interested in pursuing this transaction if it has the support of the SFX Board of Directors.

We are prepared to discuss any and all aspects of our offer with you or your representatives and are eager to proceed promptly with this process. We look forward to meeting with you at your earliest convenience.

Sincerely yours,

[signed]

Steven Dinetz

President and Chief Executive Officer

Chancellor Holdings Corp.

cc: The Board of Directors

SFX Broadcasting, Inc.

Stations currently owned by Chancellor, their locations and formats, include:

o KTCJ-AM/KTCZ-FM (Minneapolis): Progressive Album Rock

o WUBE-AM (Cincinnati): All Sports

o WUBE-FM (Cincinnati): Country

o WYGY-FM (Cincinnati): Young Country

o WALK-AM/FM (Nassau/Suffolk, NY): Full Service Adult

Contemporary

o WOCL-FM (Orlando): Oldies 

o KMEN-AM (Riverside/San Bernardino, CA): Oldies

o KGGI-FM (Riverside/San Bernardino, CA): Contemporary Hit

Radio

o KFBK-AM (Sacramento): News/Talk

o KGBY-FM (Sacramento): Adult Contemporary

o KHYL-FM (Sacramento): Oldies

Hicks, Muse, Tate & Furst Incorporated, of Dallas, is a leading private investment firm.

CONTACT: Kekst and Company

Roy Winnick, 212/593-2655