Radio One Essay

2190 Words9 Pages
| Radio One, Inc. | Memo To: Mr. Alfred Liggins III From: Team 5 Date: [ November 22, 2011 ] Re: Clear Channel Communications Inc. acquisitions Mr. Liggins The recent merger between Clear Channel Communications Inc. and AMFM has presented a rare opportunity for Radio One, Inc. The proposed divestiture of Clear Channel will be the largest in the history of the industry. Radio One, Inc. can acquire 12 established urban stations in the top 50 markets, which rarely become available. Market analyst have already speculated on the possible acquisition, causing Radio One’s stock price to rise from the mid-$40s to $97 a share! The trading multiple is at around 30x’s the forward BCF, which is substantially larger than the typical…show more content…
In 1999, a rare opportunity was presented to Radio One, Inc. Clear Channel Communications, Inc. was set to merge with AMFM, creating the largest radio company in the world. Although recent actions have relaxed the national ownership cap on the limit of stations allowed to be owned by one entity, Clear Channel would still have to divest nearly 100 stations in 37 markets. Radio One could acquire 12 stations from Clear Channel, which would allow Radio One to draw more African-American listeners than any other media vehicle targeting that audience, including BET. The acquisition would double the size of Radio One, including obtaining a station in Los Angeles, the fourth largest African-American market in the United States. Benefits and Risks of Acquisition The acquisition would allow Radio One to acquire stations in the top 50 African-American markets. Radio One has always produced broadcasts that target that group, which is the largest minority group in America. Based on the information from the case, the African-American minority group is expected to experience 60% faster population growth than the general population. The minority group has also experiencing 150% faster income growth between 1980 and 1995. African-Americans listen to the radio on average 24% longer than the general population. That information is favorable to the acquisition decision, as the new markets should experience an increase in advertising revenue. One concern is that

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