CBS Completes Radio Divestiture

CBS Corporation (CBS - Analyst Report) announced the completion of the divestiture of its four radio stations – KINK-FM, KUPL-FM, KUFO-FM and KCMD-AM – in Portland, OR, to Alpha Broadcasting for $40 million in cash.

CBS has been aggressively selling slower-growth radio stations in mid-sized markets to focus on large markets that promise real growth. Management is looking for accretive options to divest more radio stations since the market for station sales has improved.

As the company divests non-core assets, it is leveraging its strong balance sheet to deploy cash in higher-growth interactive businesses that complement its core operations. Its acquisition of CNET Networks in June 2008 is notable. It also bought Last.fm, a global community-based music discovery network, in May 2007 for $280 million.

Radio operations are in the middle of a secular industry decline and cyclical softening. Radio revenue fell 23% year over year in the second quarter of fiscal year 2009. We expect the planned divestitures of the poor-performing local stations to slacken this decline.

Longer term, we think CBS’s string of divestitures will strengthen operations as the company rationalizes its portfolio with better margin and higher growth businesses. As such, we have a Neutral recommendation on the stock.