Cumulus Media’s tentative deal to acquire Citadel Broadcasting for $37 per share is now a finalized and signed agreement. Depending on which side’s math you prefer, the total price is either $2.4 billion or $2.5 billion.
After fighting to remain independent after bringing the company out of Chapter 11 reorganization, Citadel CEO Farid Suleman, pictured, issued a gracious statement in announcing the deal to be acquired by Lew Dickey’s Cumulus Media. “Citadel’s Board of Directors has been focused on maximizing stockholder value. We believe this transaction appropriately reflects the value of the Company’s assets and is in the best interests of Citadel stockholders – who can benefit from a substantial cash payment as well as stock in the combined company, which provides the opportunity to participate in the upside of the combination. I am particularly grateful to Citadel’s dedicated employees who have been instrumental in creating substantial value since the Company’s reorganization in June 2010,” said Suleman.
Under the final terms of the deal, Citadel shareholders will have the option of taking either $37 in cash or 8.525 shares of Cumulus Media stock for each share of Citadel’s Class A or Class B stock or its warrants to acquire Class B stock. In all, approximately $1.4 billion in cash and 151 million Cumulus shares are available to Citadel shareholders. To the extent that either the cash or stock portion is oversubscribed, the cash/stock split will be prorated.
The deal will require approval by Citadel shareholders and regulatory approvals by the FCC and potentially either the DOJ or FTC under the Hart-Scott-Rodino antitrust law. No vote by Cumulus shareholders will be required, since shareholders holding approximately 54% of the voting power of Cumulus Common Stock have executed written consents.
“This transaction provides us with a unique opportunity to leverage our proprietary operating systems and technology platform across a vastly expanded national footprint. We’ll have the national scope and financial strength necessary to make critical investments in content and technology necessary to compete in today’s rapidly evolving media landscape. I look forward to working together with our 4,000 new team members to build Cumulus into a dynamic and nationwide local media company,” said Cumulus CEO Lew Dickey.
Interestingly, the Citadel announcement estimated its own sale price, including cash, stock and assumed debt, at $2.5 billion, while the simultaneous announcement by Cumulus put the price tag at $2.4 billion. RBR-TVBR had reported a recent analysis by high-yield bond analysts Bishop Cheen and Davis Hebert at Wells Fargo Securities which put the total value at $2.6 billion. The main variable is the market value of Cumulus Media stock, which had closed Wednesday (3/9) at $5.10 per share.
Dickey has already been busy lining up financing to cover the acquisition of Citadel and the pending deal to roll-up privately held Cumulus Media Partners into the public company at an enterprise value of $740 million. Cumulus said it has obtained commitments for up to $500 million in equity financing from Crestview Partners and Macquarie Capital, and commitments from a group of banks for up to $2.525 billion in senior secured credit facilities and $500 million in senior note bridge financing, the proceeds of which will be used to pay the cash portion of the merger consideration, and refinance all of the debt of all three companies.
UBS Investment Bank is acting as lead financial advisor to Cumulus, and it also has committed to Cumulus to provide debt financing. Macquarie Capital is also acting as a financial advisor to Cumulus, and it has committed to provide debt and equity financing. Moelis & Company delivered a fairness opinion to the Board of Cumulus. Jones Day is acting as legal counsel to Cumulus in the transaction. Goldman, Sachs & Co. is acting as a financial advisor to Crestview Partners.
J.P. Morgan and Lazard are acting as Citadel’s financial advisors. Lazard has delivered a fairness opinion to the Citadel Board of Directors in connection with the transaction based upon and subject to the assumptions set forth in the opinion. Weil, Gotshal & Manges LLP is acting as Citadel’s legal advisor.
RBR-TVBR observation: Lew Dickey will have plenty to talk about on his delayed Q4 financial results conference call set for Monday (3/14). Citadel hasn’t yet issued its Q4 results either, so we’ll soon have lots of numbers to digest. The bottom line, though, is that the moribund M&A market in radio has sprung back to life in 2011, first with the Bonneville sale to Hubbard and now a much bigger deal.