Hicks, Muse, Tate & Furst and Capstar Broadcasting Corporation to Acquire SFX Broadcasting in Transaction Valued at Approximately $2.1 Billion.
Holders of SFX Class A Common Stock to Receive $75 Per Share in Cash
Plus Spin-Off of SFX's Concert and Entertainment Business
Hicks, Muse, Tate & Furst Incorporated, Capstar Broadcasting Corporation and SFX Broadcasting, Inc. (NASDAQ: SFXBA) today announced the signing of a definitive agreement under which a company newly formed by Hicks Muse and Capstar will acquire SFX Broadcasting, the nation's seventh-largest radio broadcasting group based on revenues, in a transaction valued at approximately $2.1 billion, including equity and the assumption of SFX debt.
The transaction, in which Hicks Muse expects to invest approximately $400 million of equity capital, is the firm's largest in terms of total transaction value since its formation in 1989. Capstar, with 243 radio station acquisitions previously completed or announced since its founding approximately one year ago, has become the largest owner and operator of radio stations in the United States. SFX, upon completion of all previously announced transactions, will own and operate or provide services to 71 stations in 19 markets. Together, Capstar and SFX will rank as the third-largest radio broadcasting group based on revenue as well as number-one in station count, with 314 stations serving 79 markets.
Under the terms of the definitive agreement, which was unanimously approved by the Board of Directors of SFX Broadcasting, the newly formed affiliate of Hicks Muse and Capstar will acquire SFX in a transaction in which each share of SFX Class A common stock, of which there are approximately 14.6 million on a fully diluted basis, will have the right to receive consideration of $75 per share in cash. The parties have also agreed to a payment of $97.50 for each of the 1.0 million shares of SFX Class B common stock, which are held by senior management of SFX. Prior to this transaction, SFX will spin-off to current shareholders its wholly-owned subsidiary operating the company's live music and entertainment businesses. Each of the resultant 15.6 million fully diluted shares in this spin-off is estimated to have a book value of $5.50. The fully diluted number of SFX shares, 15.6 million, is approximately 350,000 less than previously disclosed because Robert F. X. Sillerman, the executive chairman of SFX, and Michael Ferrel, chief executive officer of SFX, had prior to entering into this transaction voluntarily surrendered approximately 350,000 warrants which they would have been entitled to receive upon a sale of the company. The acquiring company will assume all of SFX's outstanding debt and non-convertible preferred stock, which includes approximately $225 million (pro forma for all pending transactions) in senior bank debt, $450 million in senior subordinated notes, and $225 million of pay-in-kind preferred stock.
Thomas O. Hicks, chairman and chief executive officer of Hicks Muse, will serve as chairman of the combined company following completion of the transaction, and the company's senior management team will include R. Steven Hicks as president and chief executive officer and the other current members of Capstar's senior management team. No changes of SFX station management, station personnel or station format are currently contemplated as a result of the transaction. Tom Hicks currently also serves as chairman of Chancellor Broadcasting Corporation and, as previously announced, will be chairman of Chancellor Media Corporation upon completion of the merger between Chancellor Broadcasting and Evergreen Media Corporation, which is expected to occur in September.
Completion of the transaction is subject to various conditions, including approval by the Federal Communications Commission of the transfer of SFX's broadcast licenses, approval of the merger by the holders of a majority of the voting rights attributable to SFX common stock, the approval of certain charter amendments by certain classes of shareholders, and the expiration of the applicable Hart-Scott-Rodino waiting period. Any necessary financing beyond the equity capital to be provided by Hicks Muse will be arranged prior to closing. SFX founder and executive chairman Robert F. X. Sillerman, who owns shares representing approximately 53 percent of SFX's voting rights with respect to the merger, has committed to vote his shares in favor of the transaction. It is expected that the transaction will be consummated in the second quarter of 1998. Tom Hicks of Hicks Muse said: "Since its formation in June 1996, Capstar Broadcasting, under the capable leadership of Steve Hicks and his colleagues on the Capstar management team, has emerged as one of the best-managed major radio groups in the country, and has rapidly become the largest such group in terms of station count. Bringing together the Capstar and SFX station portfolios and station managements under Steve's continued leadership will significantly enhance Capstar's current position as one of the largest, strongest and most successful operators of radio stations in the country."
Steve Hicks of Capstar said: "Over the past four years, SFX has assembled an outstanding group of radio stations and people that, when combined with those of Capstar, will create an enterprise exceptionally well positioned to continue its active participation in the rapidly consolidating radio industry, to grow its revenues and broadcast cash flow, and to build value for its listeners, advertisers and investors. I am particularly pleased to be associated once again with SFX, a company I helped to create, and I am looking forward to working once again with its talented team of operating executives, many of whom I helped to recruit."
Robert F. X. Sillerman, executive chairman of SFX, said: "In the consolidating radio broadcasting industry, much as we believe in its continued status as a very attractive business and in its prospects, the premiums being placed upon companies such as SFX have led us to respond to the flurry of acquisition offers which we have received. We are extremely pleased that the new management, including SFX co-founder Steve Hicks, recognizes the importance of the people who have made SFX the outstanding company it is today and will continue operating the radio business with the same dedication and professionalism that has always been our goal.
"We are also thrilled to be launching our concert and entertainment business as a new publicly owned company to be named SFX Entertainment, which will own, operate through long-term leases, or have contracts with 20 concert venues in five states, including the dominant position in the number-one market in the country, New York. Indeed, SFX Entertainment is already a major presence in this business. At the time of the spin-off, it will have approximately the same operating cash flow as, and significantly less debt than, SFX Broadcasting when it went public less than four years ago. Keeping in mind the overall $2.2 billion value of this transaction to SFX shareholders, including the value of the SFX concert and entertainment business, we note that at the time of SFX Broadcasting's initial public offering, we were a company of nine radio stations in six markets with an enterprise value of about $170 million. In four short years, through the efforts of disciplined management and enterprising employees operating in a dynamic industry, we created a multibillion-dollar company. We now begin anew, in a similarly vibrant industry with a company about the same size and noticeably less financial leverage than SFX Broadcasting when it went public, and with, we believe, even greater opportunities. I and the rest of senior management, who developed SFX Broadcasting into the thriving company it is today, are looking forward to the challenge of repeating our success at SFX Entertainment. We anticipate growing SFX Entertainment to be one of the major forces in that industry. As in the radio business a few years ago, there is a positive acquisition environment. We hope to make several announcements in the near future demonstrating our commitment to this expansion strategy and beginning a new chapter in our proven history of creating shareholder value."
Steve Hicks, 47, a brother of Tom Hicks, has twenty-six years of radio broadcasting industry experience, including nineteen as a station owner. In 1987, the Hicks brothers purchased WSIX-FM, in Nashville, and under the leadership of Steven Hicks it quickly became the top country music radio station in the United States. In 1989, WSIX became part of a group known as Capstar Communications, a radio broadcasting investment group headed by Steve Hicks as president. In 1993, Capstar was, in turn, merged into SFX, which Steve Hicks co-founded with Mr. Sillerman, and which they took public in October 1993 at a price per share of $15.00.
SFX's financial advisor with regard to the transaction was Lehman Brothers, which has rendered an opinion that the transaction is fair to SFX shareholders from a financial point of view. Star Media Group, Inc. also advised SFX with regard to the transaction.
Since its formation in 1989, Hicks, Muse, Tate & Furst Incorporated has completed or currently has pending more than 100 transactions with a total capital value in excess of $24 billion. The firm has offices in Dallas, New York, St. Louis and Mexico City.
List of SFX stations follows:
San Diego, CA
WTDR-FM Hartford, CT
WBZU-FM Albany, NY
New Haven, CT
(A) Joint Selling Agreement (JSA) (B) Local Marketing Agreement (LMA) with a contract to acquire (C) Under contract to be acquired
Under contract to be sold or swapped by SFX are WHFM-FM, WBAB-FM, WBLI-FM and WGBB-AM in Long Island. WGNE-FM in Daytona Beach; KNSS-AM, KRZZ-FM and KKRD-FM in Wichita; WKTF-FM, WMSI-FM, WSTZ-FM, WJDX-FM, WJDS-AM and WZRX-AM in Jackson, Miss; and WKNN-FM and WMJY-FM in Biloxi, Miss.
CONTACT: Hicks, Muse, Tate & Furst Incorporated
Kekst and Company
Capstar Broadcasting Partners
SFX Broadcasting, Inc.
Timothy J. Klahs