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From Antitrust Law Daily, July 15, 2015

Combination of radio station operators gets U.S. approval

By Jeffrey May, J.D.

To resolve Department of Justice Antitrust Division concerns that its proposed acquisition of Lincoln Financial Media Company would substantially lessen competition for the sale of radio advertising to advertisers targeting English-language listeners in the Denver area, Entercom Communications Corp. has agreed to divest three broadcast radio stations in that market. A complaint, challenging the combination of the radio station operators, and a proposed U.S. consent decree intended to resolve the government's concerns over the transaction were filed late yesterday in the federal district court in Washington, D.C. (U.S. v. Entercom Communications Corp., Case 1:15-cv-01119).

The consent decree would require Entercom to divest to a government-approved buyer—Bonneville International Corporation—the following Denver broadcast radio stations: Entercom's KOSI FM and Lincoln's KKFN FM and KYGO FM. Entercom was required to identify the acquirer of the divestiture stations before the government would sign off on the deal. According to the government, this condition provided greater certainty and efficiency in the divestiture process. The divestitures must occur within 90 days of entry of the Hold Separate Order.

Entercom disclosed that it has entered into an exchange agreement with Bonneville. Under the agreement, Entercom also will include Lincoln's KEPN AM in Denver in a package to be traded to Bonneville in exchange for Los Angeles radio station KSWD FM, plus $5 million in additional consideration.

Entercom and Lincoln operate highly-rated radio stations in the Denver area and have multiple stations in the market that seek to appeal to and attract the same listening audiences. The Justice Department contended that, without the divestiture relief, the acquisition would have given Entercom approximately 37 percent of advertising sales on English-language broadcast radio stations. In addition, the transaction would have combined stations and station groups that were close substitutes and vigorous head-to-head competitors for advertisers seeking to reach specific English-language audiences in the Denver Metro Survey Area or MSA.

Entercom reports that it has a portfolio of over 100 stations in 23 markets, including San Francisco, Boston, Seattle, Denver, Portland, Sacramento, and Kansas City. The Philadelphia-based company is the fourth largest radio station operator in the country. Lincoln, based in Atlanta, owns and operates 15 broadcast radio stations in four metropolitan areas, including Denver.

The acquisition valued at approximately $105 million was announced in December 2014. While the transaction was under review, the Antitrust Division issued a second request to the parties. Entercom President and Chief Executive Officer David Field offered some details on the negotiations between the government and the merging parties.

“While we spent millions of dollars and seven months attempting to persuade them to approve the transaction as initially proposed, they remained unconvinced,” Field said in a memo to company staff. “As a result, we initiated conversations with a number of other broadcasters seeking a station trade that would reduce our position in Denver to satisfy the Justice Department so that they would approve the Lincoln transaction.”

First U.S. radio station challenge since 2011. It has been nearly four years since the Antitrust Division challenged a combination of radio station operators. In September 2011, the Justice Department announced a settlement, allowing the combination of radio giants Cumulus Media Inc. and Citadel Broadcasting Corporation. Under the settlement, Cumulus was required to divest two stations in the Harrisburg, Pennsylvania, market and one station in the Flint, Michigan, area to buyers approved by the Antitrust Division in order to proceed with the acquisition, valued at approximately $2.5 billion.

Attorneys: Mark A. Merva for Department of Justice Antitrust Division. Edward Marcellus Williamson (Latham & Watkins LLP) for Entercom Communications Corp. Nelson O. Fitts (Wachtell, Lipton, Rosen & Katz) for Lincoln Financial Media Co.

Companies: Bonneville International Corp.; Entercom Communications Corp.; Lincoln Financial Media Co.; Cumulus Media Inc.; Citadel Broadcasting Corp.

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