Cumulus analysis sees synergies and more in Citadel acquisition


Cumulus Media CEO Lew Dickey spent much of his quarterly conference call Monday (3/14) walking Wall Street analysts through the synergies and opportunities that he sees with the company rolling in Cumulus Media Partners (CMP) and then acquiring Citadel Broadcasting for cash and stock. He also pitched greater opportunities for employees in the much larger radio company.

Dickey told the Wall Street number crunchers that Citadel Media Inc. (CMI), the public company, has identified $50 million-plus of annual cost savings from synergies as the three companies become one. Those come from savings at the corporate level, overlap markets (although only a handful of stations nationwide will be put into a trust for divestiture to comply with FCC local ownership limits), operations (featuring deployment of CMI’s proprietary technology platform throughout the Citadel stations) and through the network business, where Dickey sees opportunities for some of the company’s top talent.

“The vast majority of it will occur in the first six months,” Dickey said when asked about the pace of those synergies during Q&A. “I would say you’re looking at 75-80% of it in the first year, but two-thirds or more of it in the first six months, and the rest would sort of tail-in in the next six months after that. So most of it 18 months, but the vast majority of it in the first 12 months and the vast majority of that in the first six months, if you will,” Dickey explained.

Aside from just having more radio stations and more revenues, Dickey told the analysts that the larger platform will give Cumulus the critical mass to develop social commerce initiatives, such as a couponing product now in beta testing, and that it will create new opportunities for employees to advance and for the company to recruit new sales, programming and management talent.

Dickey says merger will create opportunities for staffers and to develop social commerce.

Lew Dickey:

And just because Cumulus Media is buying Citadel Broadcasting for $2.4 billion-plus, getting $500 million in new equity and borrowing up to $3.025 billion, don’t assume that Lew Dickey is out of the station buying market. Quite the contrary, the CEO says the new, larger company will be “well positioned for highly accretive acquisitions, in terms of our ability for incremental tuck-ins and vertical integration – and incremental acquisitions for the network platform as well.”

The 13-page pdf that Dickey discussed with the analysts to explain the Cumulus-Citadel merger is available as an attachment on this page.

RBR-TVBR observation: Lew was a broadcaster first, but he’s learned the Wall Street numbers game. Unlike the original round of consolidation when “synergy” meant cutting staff by having one local operator acquire another, the improvements now are coming primarily from technology, scale and best practices. In fact, Cumulus and Citadel both have stations in only six markets, so there won’t be much combining of staffs at the local level. That also gave Dickey an advantage in stalking Citadel, since so few stations will have to be divested. So the numbers make Wall Street happy and the word to Citadel staffers from the new “Big Guy” in Atlanta is that the new mega-company will have lots of opportunities for the best to shine, regardless of which company they are from. We’ll take that at face value until proven otherwise.