NEW YORK-Boston-based American Tower Systems Corp. will become a stand-alone company following CBS Corp.’s acquisition of its parent and its spin-off, which involve a secondary offering of the tower company’s stock.
American Tower owns and/or operates more than 1,800 wireless communications towers in 44 states and the District of Columbia.
CBS was expected last week to take over American Tower’s parent company, American Radio Systems Corp., which is to become a CBS subsidiary.
For each American Radio share they own, shareholders are to receive a cash payment of $44 plus one share of the American Tower common stock from the planned secondary equity sale of the new spin-off.
As a consequence of its parent’s merger, American Tower estimates it will be obligated to pay CBS between $305 million and $330 million for taxes. The tax reimbursement obligation is the result of the rise in American Radio’s share price due to investor anticipation of its purchase by CBS.
At the close of trading June 3, the 52-week price range was between $38 and $68.25 for American Radio’s shares, which trade on the New York Stock Exchange. The stock closed June 3 at $64.87, up $1.50 from the prior day.
“While we appreciate investor enthusiasm, we are very concerned that the market is failing to understand or adequately consider the huge tax liability that the run-up in our stock price generates,” said Steven B. Dodge, board chairman, president and chief executive officer of American Radio and American Tower, in a June 3 announcement.
“This is a potentially massive number that materially diminishes the company’s ability to pursue productive growth opportunities going forward.”
American Tower said it intends to issue enough preferred stock to fund the tax reimbursement obligation, which relates to the distribution of American Tower common stock to American Radio shareholders.
Proceeds of the planned follow-on offering of American Tower common stock are to be used to redeem that preferred stock and to help repay bank loans.
American Tower said June 3 it has registered with the Securities and Exchange Commission for an offering of 23.62 million common shares of stock.
Plans are for American Tower’s stock, which now trades over the counter, to be listed on the Big Board once the new common equity shares are sold.
