Citadel price falling as stock market drops


RBR-TVBR analysis
When Citadel Broadcasting announced acceptance of the takeover bid by Cumulus Media, Citadel proudly proclaimed that the value worked out to $39.45 per share, since Cumulus’ stock price had gone up since the official bid was submitted at $37 per share. But that was before an earthquake and tsunami in Japan sent stock prices plunging around the world.

As detailed by RBR-TVBR the $37 per share value was based on a $4.34 stock price for Cumulus. When the closing comes late this year the investment funds that own nearly all of Citadel’s stock will select the maximum stock option if Cumulus is trading above $4.34 and the maximum cash option if it is below that mark.

Right now Cumulus is back below $4.34, falling with the rest of the market in the wake of the Japanese disaster. The stock closed Wednesday at $4.00. (Update: It regained seven cents on Thursday.)

For the maximum cash option Cumulus would pay $30 cash and 1.613 shares of stock for each Citadel share. At $4.00 that works out to $36.45 per share.

Repeat the math spelled out in our earlier story – 47 million shares X $36.45 + $700 million in debt assumption – and you get a total price of $2.41 billion.

Of course, if the Citadel shareholders take the maximum cash option, Cumulus will borrow more money and issue fewer new shares. The Citadel shareholders would end up with 30% of the total Cumulus Media shares, rather than 51%.

In truth, the new shares being issued are likely to be sold in the public market ASAP by the discounted debt vulture funds that wound up owning Citadel via Chapter 11. So look for 151 million shares to be added to the public float and greatly increase the average daily trading volume for Cumulus if the maximum stock option is taken – or for 88.8 million new shares to enter the market if the maximum cash option is selected and also increase trading volume, just not by quite as much.