By SCOTT FYBUSH

CBS Radio’s planned IPO isn’t happening, and now we know why – early Thursday morning, CBS announced it’s spinning off its radio stations in a Reverse Morris Trust that will find them merging with Entercom.

“As part of the transaction, CBS shareholders will have the opportunity to exchange all, some, or none of their CBS shares for CBS Radio shares. Immediately following the completion of this exchange offer, CBS Radio will merge with an Entercom subsidiary, with the new CBS Radio shareholders receiving Entercom shares in exchange for their CBS Radio shares in the transaction. After completion of the merger, CBS Radio shareholders will receive approximately 105 million Entercom shares, or 72% of all outstanding shares of the combined company on a fully diluted basis. Existing Entercom shareholders will own 28% of the combined company on a fully diluted basis,” explained CBS in its announcement of the deal.

The combination of CBS Radio and Entercom will create a 244-station group, bringing Entercom into many more top-10 markets than it’s previously occupied. That includes its home base of Philadelphia, where Entercom will instantly become a major player with the CBS cluster of all-news KYW (1060), talk WPHT (1210), country WXTU (92.5), sports WIP (94.1), AC WTDY (96.5) and classic hits WOGL (98.1). It includes the dominant CBS Radio cluster in New York – all-news WCBS (880) and WINS (1010), sports WFAN (660)/WFAN-FM (101.9), top-40 WBMP (92.3), classic hits WCBS-FM (101.1) and AC WNEW (102.7).

Entercom will enter Pittsburgh with the CBS cluster of news-talk KDKA (1020), sports KDKA-FM (93.7), hot AC WBZZ (100.7) and country WDSY (107.9), and it will enter Hartford with news-talk WTIC (1080), rhythmic WZMX (93.7), hot AC WTIC-FM (96.5) and AC WRCH (100.5).

They’ll join Entercom’s existing smaller markets in the region, including important clusters in Wilkes-Barre/Scranton, Rochester and Buffalo. (Ironically, Rochester and Buffalo were two of the smaller markets that CBS Radio made a point of exiting more than a decade ago; in Rochester, Entercom ended up with two of the FMs CBS Radio spun off, WPXY and WCMF.)

And then there’s Boston…where our analysis for subscribers continues:

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Boston is one of several markets where the CBS Radio/Entercom merger presents market-cap issues that will have to be resolved. (Others are mostly out west, including Seattle, San Francisco and Sacramento.)

CBS Radio comes to the table near the market cap: it has four FMs – sports WBZ-FM (98.5), classic rock WZLX (100.7), top-40 WODS (103.3) and AC WBMX (104.1) – as well as news-talk WBZ (1030).

Just across Market Street in Allston from the CBS Radio FM studios, Entercom’s cluster is smaller – talk WRKO (680), ESPN WEEI (850), sports WEEI-FM (93.7), R&B WKAF (97.7) and active rock WAAF (107.3).

What happens next? With a total of ten signals, at least two will have to be spun off just to meet the FCC’s cap of eight stations in a market the size of Boston. Under present rules, those spins will have to be FMs, since the “sub-cap” that limits an owner to a maximum of five stations on a band is still in effect.

And while it would be easy to speculate that those spins would be the weakest signals, WKAF and WAAF, there’s also the Justice Department to take into account. Will it allow one owner to control both of the big sports FMs in town, which have been the fiercest of rivals since CBS put “Sports Hub” on the air in 2009?

That would have been an easy answer just last year – but as of yet we have no idea now what a deregulatory Trump-era Justice Department might allow. Nor do we know yet what Ajit Pai’s FCC will do with proposals to eliminate those ownership sub-caps; if those go away, would a combined CBS Radio/Entercom keep most of its FMs and spin 680 and 850 instead?

And that’s not even addressing what will happen behind the scenes: among other things, Boston happens to be home to the national engineering directors of both CBS Radio (Paul Donovan) and Entercom (John Kennedy). It’s a certainty that Entercom won’t keep three facilities in the long run, which means WBZ(AM) would leave 1170 Soldiers Field Road eventually, finding its first new home since 1948 – but there’s also no room at the existing Entercom or CBS Radio FM studios to combine the entire cluster, either.

(This is also a potential issue in Philadelphia, where KYW radio moved back in with KYW-TV a few years ago and will likely end up moving again.)

As with ABC’s spin of its radio assets (in a similar reverse Morris trust), we’d expect Entercom will have a long-term license to keep using valuable identities like “WBZ,” “KYW,” “KDKA” and “WCBS” – and we should note that while the deal includes CBS Sports Radio, it does not include CBS Radio News, which was not part of the CBS Radio division and will remain under the CBS News Division.

There’s much more to come from this deal, of course, and we’ll have more analysis and updates in Monday’s NERW.

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