Disney sells ABC Radio Network to Citadel

By Gary Gentile
Sentinel Staff Writer

February 7, 2006, 4:14 AM EST

LOS ANGELES -- The Walt Disney Co. is selling its 22 ABC Radio stations and network to Citadel Broadcasting Corp. in a $2.7 billion cash and stock deal that would hand Disney shareholders a majority stake in the new company.

The deal, which does not include Disney's ESPN and Radio Disney network, would leave Citadel with 177 FM stations and 66 AM stations in the country's top markets, making it the nation's third largest radio group. The complex transaction is structured to be tax free to Disney shareholders and give them about a 52 percent stake in the new company.

Also Monday, Disney reported higher earnings in its first quarter despite a plunge in profits from its studio division.

Disney has said for more than a year it was looking to sell its ABC radio group. Owning the radio stations is not important to the company's core goals of creating popular shows, using new technology and expanding internationally, Disney said Monday.

"With this merger we have a unique opportunity to offer Disney shareholders ownership in a new radio leader that will be well positioned for long-term success," Disney Chief Executive Robert Iger said.

The new company, to be called Citadel Communications, will be led by Citadel CEO Farid Suleman.

The media conglomerate said net income rose to $734 million, or 37 cents per share, in the quarter ended Dec. 31, compared with $666 million, or 33 cents per share, in the same period last year. Revenue rose slightly to $8.854 billion from $8.666 billion in the same quarter last year.

The current quarter included a one-time gain of $70 million, or 2 cents per share, related to the sale of assets.

The results of 35 cents per share after the one-time gain beat estimates from analysts surveyed by Thomson Financial, which had expected earnings of 30 cents per share on revenue of $8.791 billion.

The results sent Disney shares rising more than 2 percent in late-session trading, after finishing the regular session at $24.96 on the New York Stock Exchange.

Disney's studio profits fell 60 percent during the quarter on lower box office results and home video sales. The quarter suffered from a difficult comparison with last year, which saw the theatrical release of "The Incredibles" and "National Treasure."

The company said it expects higher revenue from the studio next quarter when its theatrical hits "Chronicles of Narnia: The Lion, The Witch and The Wardrobe" and "Chicken Little" are released on DVD.

Profits rose 51 percent at Disney's theme parks on the success of the yearlong promotion marking the 50th anniversary of its Disneyland park in Anaheim. Attendance at the company's two domestic parks and its parks in Tokyo and Paris grew by double digits.

Disney's newest park in Hong Kong saw strong attendance over the Chinese New Year. The park sold out on four consecutive days during the holiday period, the company said.

Advertising revenue at Disney's ABC television network and cable properties, including ESPN, grew by double digits in the quarter and remain strong, the company said. ABC is benefiting from strong ratings growth from hits shows such as "Lost" and "Grey's Anatomy."