Yesterday, CBS Corp. (CBS) agreed to sell four of its radio stations – KINK-FM, KUPL-FM, KUFO-FM and KCMD-AM – in Portland, Oregon, to Alpha Broadcasting (a company formed by radio executive Larry Wilson and Endeavour Capital) for $40 million in cash.

The company has been aggressively selling slower-growth radio stations in mid-sized markets to focus on the large markets that promise real growth. In the past eight months, CBS has divested twelve radio stations. Management is looking for accretive options to divest more radio stations since the market for station sales has improved.

As the company divests non-core assets, it is leveraging its strong balance sheet to deploy cash in higher-growth interactive businesses that complement its core operations. Its acquisition of CNET Networks in June 2008 is notable. It also bought, a global, community-based music discovery network, in May 2007 for $280 million.

Radio operations are in the middle of a secular industry decline and cyclical softening. Radio revenue fell 23% year over year in the second quarter of 2009. We expect the planned divestitures of the poor-performing local stations to slow this decline.

Longer term, we think CBS’s string of divestitures will strengthen operations as the company rationalizes its portfolio with better margin and higher growth businesses. As such, we have a Neutral recommendation on the stock.

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