Part one of the big two-part expansion of Cumulus Media is now complete. The company has closed on its roll-up Cumulus Media Partners, the big-market group it already managed, but was previously only its minority owner.
By acquiring the portion of CMP that it didn’t already own, Cumulus Media has now added to its portfolio of 100% owned properties 32 radio stations in nine markets, including San Francisco, Dallas, Houston, Atlanta, Cincinnati, Indianapolis and Kansas City.
In connection with the acquisition, Cumulus issued 9,945,714 shares of its common stock to affiliates of the three private equity firms that had collectively owned 75% of CMP — Bain Capital Partners, The Blackstone Group and Thomas H. Lee Partner. Blackstone received shares of Cumulus’ Class A common stock. To avoid attribution under FCC rules due to their holdings in other broadcasters, Bain and TH Lee each received shares of a newly authorized Class D non-voting common stock.
At Monday’s closing stock price of $3.51, the stock conveyed to the private equity firms was worth just shy of $35 million.
Also in connection with the acquisition, currently outstanding warrants to purchase common stock of a subsidiary of CMP were amended to instead become exercisable for up to 8,267,968 shares of common stock of Cumulus. At the $3.51 price, the total value is $29 million.
Cumulus has operated CMP’s business pursuant to a management agreement since CMP acquired the radio broadcasting business of Susquehanna Pfaltzgraff Co. for $1.2 billion in 2005. The total value in this deal, including debt assumption, was estimated at $740 million, reflecting the drop in the market for broadcast properties from the pre-recession peak.
Now, for Cumulus CEO Lew Dickey it’s on to even bigger game – Citadel Broadcasting, which it is buying for around $2.5 billion.
“We are pleased to have completed this important step with our acquisition of CMP. The combination of Cumulus and CMP is a strategic transaction that simplifies our operational structure and positions us to complete our pending transformational deal with Citadel Broadcasting. Following the completion of the Citadel acquisition, we plan to capitalize on the scale of the resulting pro forma platform of approximately 570 stations in 120 markets, and a radio network serving approximately 4000 station affiliates, to compete aggressively with our content and distribution capabilities in broadcast and new media,” said Dickey in a statement. “We are also excited about the opportunity to offer investors what we expect will be the largest pure play radio company, with a large and liquid market capitalization as well as a strong and flexible balance sheet that is well-positioned for continued growth,” he added.
Cumulus had previously said it hoped to close the Citadel acquisition around Labor Day, just a month from now, but is now saying only that closing is expected before the end of the year.