Calculating the Citadel sale multiple


RBR-TVBR analysis: Now that Citadel Broadcasting has reported its full year 2010 financial results we can calculate a more accurate multiple for the company’s sale to Cumulus Media. So, let’s do the math! For 2010 Citadel reported segment operating income (SOI) of $272.2 million. SOI appears to be equivalent to broadcast cash flow (BCF). That SOI, by the way, was up 24.6% from 2009.

The company also reported adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $251.2 million, up 28% from the previous year. EBITDA is always lower than BCF because the calculation includes corporate overhead. Most of that corporate overhead will presumably be saved by Cumulus, which already has its own corporate operations and, like Citadel, already deals with the costs of being a publicly traded stock company.

Citadel CFO Randy Taylor told analysts the company has about 45.6 million shares outstanding, so that is the number we will use.

We noted before that there is some confusion about the Citadel purchase price. That’s because it varies depending upon the share price for Cumulus and the amount of debt that will have to be assumed and refinanced.

For a while after the deal announcement Cumulus was above the $4.34 price upon which its offer valuation of $37 per share for Citadel was based. Lately, though, Cumulus has been below that price level. For simplicity’s sake we will use $37 for the calculation, but that will have to be adjusted for the actual trading price for Cumulus when the deal closes a few months from now.

45.6 million Citadel shares times $37 is $1,687,200,000. That’s what Cumulus is paying in cash and stock for the Citadel equity.

So, how much debt do we add on? As of December 31, 2010 Citadel had debt of $750 million, but it also had cash on hand of $111.6 million. So the net debt which Cumulus will have to refi is $638.4 million, plus an early payment penalty of $30 million. Worth noting: As Citadel puts more free cash flow into its coffers this year that cash will essentially reduce the total cost to Cumulus.

$1,687,200,000 plus $668,400,000 is $2,355,600,000, so a little under $2.4 billion.

Divide the total price tag by $272.2 million and you have a BCF multiple of 8.65.

Divide the total price tag by $251.2 million and you have an EBITDA multiple of 9.38.

As noted above, those multiples will change slightly by the actual closing, based on the Cumulus stock price and the net debt assumption.