Citadel reported to be negotiating sale to Cumulus


UPDATE: As soon as the closing bell sounded on Wall Street Citadel Broadcasting announced that it is, indeed, in exclusive negotiations to be bought by Cumulus Media for cash and stock totaling $37 per share.

Under pressure from major shareholders to sell the company, Citadel Broadcasting management is now reported by CNBC Anchor/Reporter David Faber to be in sale negotiations with Cumulus Media. Citadel had previously rejected a takeover bid from Cumulus.

Citadel’s usually thinly-traded shares and warrants jumped about five bucks to the $35 area. Faber had reported that the deal being hammered out is worth about $37 in cash and stock, with the majority, around $30, in cash. The report also stated that Entercom had also bid for Citadel after the Cumulus bid became known.

Dissident shareholder Geoffrey Raynor’s R2 Investments has been leading a group of big holders pressuring the Citadel board to negotiate with Cumulus. He even managed to enlist the New York Times in publicizing the effort.

The board at Citadel had originally insisted that the Cumulus bid at $31 undervalued the company and that shareholders would be better served by having CEO Farid Suleman and his team grow the company. That was before the sale of 17 big market stations by Bonneville International to Hubbard Broadcasting set a post-recession benchmark of around eight times cash flow for radio assets.

Click here for RBR-TVBR’s exclusive analysis of the finances of a merged Cumulus-Citadel.

Cumulus Media has subsequently cut a deal to roll-up its partly owned Cumulus Media Partners.

Click here for RBR-TVBR’s exclusive analysis of how the Bonneville-Hubbard reset multiples.

RBR-TVBR observation: As we had theorized previously, Faber reports that Crestview Partners would put its entire $500 million commitment to its station-buying partnership with Cumulus into this one, big acquisition. It looks like Cumulus would have to borrow a bit more than $500 million to fund the cash portion of the deal, but that should be doable. Citadel hasn’t yet reported its Q4 results, but it will no doubt have improved cash flow to keep the multiple from rising too much above the 8X area that Lew Dickey has been targeting.