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Entercom, CBS Radio to combine in tax-free merger

Entercom Communications Corp. has agreed to combine with CBS Corp.'s CBS Radio Inc. in a tax-free merger to become the second-largest radio station owner in the U.S.

The transaction will create a radio platform, with a nationwide footprint of 244 stations, including 23 of the top 25 U.S. markets, as well as robust digital capabilities and a growing events platform, the company said Feb. 2. The combined company will be called Entercom and will be headquartered in Philadelphia, with a significant ongoing presence in New York.

The deal, which is subject to approval by Entercom shareholders, is expected to close during the second half of 2017, subject to certain regulatory approvals and other customary closing conditions. Entercom Chairman Joseph Field, a controlling shareholder of the company, has agreed to vote in favor of the transaction.

After completion of the merger, CBS Radio shareholders will receive about 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.

The combination will be effected through a "Reverse Morris Trust" transaction, which is expected to be tax-free for CBS and its shareholders. Under the transaction, CBS shareholders will be offered CBS Radio shares in exchange of all, some, or none of their CBS shares. After 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.

Upon closing, the company's board will consist of five current Entercom directors, including David Field as chairman, and four directors nominated by CBS Radio.

Morgan Stanley & Co. LLC and Centerview Partners are serving as financial advisers, and Latham & Watkins LLP is serving as legal counsel to Entercom. Goldman Sachs & Co. is serving as financial adviser, and Wachtell Lipton Rosen & Katz is serving as legal counsel to CBS Corp.