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K.C. Neel
After 11 tumultuous months as Chancellor Media's CEO, Jeff Marcus was cut loose last week.
Marcus, who couldn't be reached for comment, isn't walking away empty handed. He'll remain a Chancellor board member and stands to receive $6.25 million in cash as an end-of-employment payment. He'll also get options for 2.2 million Chancellor shares. Based on Chancellor's closing price of $45.56 on March 16, that totals out to $100.2 million in stock alone.
Why was Marcus pushed out of Chancellor, a radio and outdoor advertising company owned by his good friend Tom Hicks of Dallas-based venture capital firm Hicks, Muse, Furst & Tate?
His 11-month tenure at Chancellor was marked by an extraordinary frenzy of activity. The company was on a buying spree for the past couple of years and Marcus' charge, after he took the job, was to continue that trend. In the 11 months he headed Chancellor, the company announced some $8 billion in deals.
But Chancellor's stock has traded well below its radio compadres for months and investors reached the breaking point after Chancellor announced it was buying LIN Broadcasting for $1.5 billion and Capstar Broadcasting for $4.1 billion. Both firms are controlled by Hicks, Muse and several industry analysts balked at the premium the investment firm was getting over other shareholders of those companies. Not only that, but Chancellor, which would've ended up with 13 TV stations, 465 radio stations and a big outdoor advertising business, would've been saddled with $7.3 billion in debt.
At the same time, things inside Chancellor weren't going smoothly after Marcus' arrival at Chancellor. His appointment led to the departure of longtime CEO Scott Ginsburg, who had been popular with both employees and Wall Street analysts.
Marcus also brought two high level Marcus executives with him - Tom McMillin to serve as CFO and Richard Gleiner to serve as chief counsel - which resulted in further defections among Chancellor's higher echelon. Two months ago, CFO Matt Devine followed Ginsburg out the door and COO James de Castro was threatening to quit as well. His input at the company was crucial, analysts say, because Marcus knew practically nothing about the radio business and de Castro is a highly regarded radio executive with years of experience.
Meanwhile, Marcus was spending money at Chancellor like there was no tomorrow. He moved the company's headquarters from modest digs in Irving, Texas, to upscale berths in downtown Dallas and he upgraded the company's plane to a flashy Gulfstream IV.
With Marcus' departure, McMillin and Gleiner, de Castro will now serve as president and vice chairman of the newly named Chancellor Radio, while Hicks will serve as CEO. The LIN transaction has been scuttled and Chancellor, which announced earlier this year it was putting itself on the sales block, won't be sold after all.
Hicks also said last week that Chancellor will trim corporate overhead by more than $15 million. It's selling the Gulfstream, disbanding its mergers-and-acquisitions department, and moving its headquarters to less expensive suites. The company anticipates taking a charge of about $25 million in its first quarter ending March 31 to account for the severance payments and other costs associated with the restructuring. Back to this issue
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