Since nearly all of the stock and warrants of Citadel Broadcasting are held by distressed debt vulture funds who like to cash out sooner, not later, it seemed unlikely that the class action law firms who began trolling for clients when the company’s sale to Cumulus Media was announced would find any clients. But indeed one of them did.
In its annual report filed with the SEC, Citadel reported that it is facing two purported class action lawsuits filed in a state court in Las Vegas, NV, where the company is incorporated. One was filed March 14th against Citadel and its directors and another on March 23rd against Citadel, its directors and the entities created by Cumulus to carry out the pending merger.
“The complaints allege that the Company’s directors breached their fiduciary duties by approving the Cumulus Merger for allegedly inadequate consideration and following an allegedly unfair sale process. The complaint in the first action also alleges that the Company’s directors breached their fiduciary duties by allegedly withholding material information relating to the Cumulus Merger. The two complaints further allege that the Company and Cumulus aided and abetted the Citadel directors’ alleged breaches of fiduciary duty, and the complaint filed in the second action alleges, additionally, that [the Cumulus entities] aided and abetted these alleged breaches of fiduciary duty. The complaints seek, among other things, a declaration that the action can proceed as a class action, an order enjoining the completion of the Cumulus Merger, rescission of the merger, attorneys’ fees, and such other relief as the court deems just and proper. The complaint filed in the second action also seeks rescissory damages. The Company intends to vigorously defend against these actions,” Citadel said in its SEC filing.
RBR-TVBR observation: It would be pretty hard to make the case that Citadel’s board didn’t conduct an aggressive auction when they managed to push the Cumulus bid up from $31 per share to $37 per share. It is well known that Entercom Communications bid aggressively and that Citadel CEO Farid Suleman pressed his own plan to recapitalize the company. Moreover, it is highly unlikely that the overwhelming majority of Citadel’s shareholders want anything to do with this class action lawsuit which purports to represent them. They just want their money as soon as possible.