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CBS To Spin Off Radio Business

to spin off 20% of radio business IPO planned by year end; CBS sees third-quarter charge By Jeffry Bartash,

CBS Corp, in a bid to boost its flaggng stock price,. will sell up to 20 percent of its radio and billboard advertising group in an initial public offering.

Analysts hailed the move for the company's most profitable units.

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CBS executives told analysts at a meeting Thursday that the television and radio network intended to trim about $180 million in costs and that the company is on track to break even or show a profit next year as revenue grows.

The new spin-off, to be called Infinity Broadcasting, will own and operate the world's largest radio group, with more than 155 radio, 80 of them in the top 20 U.S. markets, the company said in a statement. The company is named after Infinity Broadcasting, the radio company that CBS executive Mel Karmazin sold to CBS more than two years ago for $3.8 billion.

"It's a positive move," Merrill Lynch analyst Jessica Reif Cohen said after an analyst meeting at CBS's corporate headquarters. "It's the right thing to do. They're not taking their eye off the ball at all."

Also included in the radio segment are TDI, one of the largest outdoor advertising companies in the nation, and the company's minority equity investment in Westwood One, the largest U.S. producer and distributor of news, talk, sports and entertainment radio programming.

Mel Karmazin, chairman and chief executive of the CBS Radio Group, is to hold the same titles at Infinity. He'll remain president and chief operating officer of the parent CBS company.

"We believe that in offering shares of the new Infinity Broadcasting, we will unlock the value of our largest and fastest-growing operating segment - our radio and outdoor businesses," CBS Corp. CEO Michael H. Jordan said in a statement.

"At the same time," Jordan said, "the offering should create a company with significant borrowing capacity, as well as an attractive stock, for radio and outdoor acquisition opportunities."

Bruce Rabbe, n analyst at San Francisco-based Collins & Co., agreed that the radio unit has been "undervalued" and said the IPO will help investors see the difference between the booming CBS radio business and the television network, which is widely seen as the company's weakest link. "It does help shareholders segregate the two parts of the company," said Rabbe.

CBS told analysts the new company will have 1999 after-tax cash flow of about 77 cents per share on a total of about $10 billion of yearly earnings before interest, taxes and amortization; a $3 billion debt capacity; and an investment-grade bond rating.

Karmazin shot down talk that he may be readying the CBS Network for a sale. One recent press report, for example, said that CBS was talking to USA Networks chief Barry Diller.

"Make no mistake about it, the CBS television network is my favorite asset," Karmazin said. "If anybody believes that CBS will be sold, and is buying our stock for that reason, then my suggestion is to sell the stock."

Karmazin said the network is scheduled to show a profit in 1999. The company will cut from $80 million to $95 million in prime time programming costs; about $35 million in news and sports programming expenses; and another $35 to $40 million in network and corporate support costs.

Karmazin said that it's been "frustrating" that CBS's stock price hasn't reflected the value of the company.

Boosting the network's bottom line next year will be the NFL playoff season, he said. Plus, the Howard Stern Radio Show and Hollywood Squares are expected to generate revenue increases, he said.

The entertainment giant's stock price has sagged from its mid-July price of 35 following its release of a smaller-than-expected second-quarter profit, the move may also quiet some concerns about budget cuts. On consecutive days this week, the New York Post and The Wall Street Journal reported that massive staff reductions and other measures would be taken to cut losses at the TV network. CBS responded by saying it's "always looking for operating efficiencies."

As part of a continuing effort to streamline operations and reduce costs, CBS said it will likely take a restructuring charge of $50 million to $70 million in the third quarter.

CBS, which also owns part of the web site, said it expects to complete the offering by year-end.

Written by Jeffry Bartash, Steve Gelsi, David Wilkerson

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