call sign question

[Garrett Wollman]

<<On Fri, 22 Jun 2007 18:09:31 -0400, "Kevin Vahey" <kvahey@gmail.com> said:

> So in other words it is up to the seller? I forgot about WFLA in Tampa
> keeping its call.

There is no automatic change of callsign.  If anything is to happen
other than that, it would be specified in the purchase-and-sale
agreement.  Of course, stations may have other rights (such as
intellectual property) and assets (goodwill) tied up in their
callsigns, and any competently-drawn contract would have to cover
those.

Of course, the Disney/Citadel transaction is a rather oddly-structured
one.  Effectively, it is the Disney shareholders (but not The Walt
Disney Company itself) who are buying Citadel, not the other way
around.  That's why Citadel has to spin stations; if Citadel were the
acquirer, they would not be required to spin anything except in
markets with ownership overlaps.  The way this transaction was
structured was:

1) Disney spins ABC Radio to shareholders as an independent company.
Since the ownership of both companies is the same, there is no change
in control, so the FCC effectively had no say.  (The Commission still
had to approve the transaction, but it had no legal basis by which it
could withhold that consent.)

2) The new company has a subsidiary (probably referred to as "Merger
Sub" in the legal papers -- I haven't read them recently, and it
doesn't actually matter what the name is).  That subsidiary and
Citadel merge.  Citadel shareholders receive stock in the new company
in exchange for their interests in Citadel.  If I remember correctly,
the transaction values Citadel at about 45% of the combined companies,
which is a change in control for both companies as far as the FCC is
concerned.

3) Once the deal is completed, the merged companies have the option of
restructuring their licenses through the use of "pro forma" license
assignments, which require little FCC involvement and cost less to
file.  Broadcasters often do this even after acquiring a single
station in order to standardize their corporate structures for tax
reasons.  For example, many companies create one corporation (or these
days more often an LLC) to own each individual license, and then an
interlocking structure of corporations and limited partnerships above
that to manage state income tax liabilities.[1]  Look at any recent
biennial ownership filing from nearly any moderate-size station group
for an example.  Clear Channel and CBS don't do this as a general
practice, although they do both carry over such structures from the
companies they have purchased.

-GAWollman

[1] Some states levy income tax on the entire earnings of every
company doing business there.  The way to avoid this is apparently to
create this complex structure so that the main company, where most of
the earnings are, never actually "does business" in one of these
states.