Cumulus Media teams up with Crestview to buy radio properties


Cumulus Media and Crestview Partners announced formation of a strategic investment partnership that will seek to invest in premium radio properties. “The partnership’s objective is to deliver significant value and achieve attractive returns through Cumulus’ proven skills in radio station management and operations, as well as its proprietary technology platform,” said the announcement issued just after the market closed on Wednesday.

Somebody must have known what was coming down. Cumulus’ stock price shot up in the final minutes of trading after being flat to down most of the session. In the end, the stock was up 4.4%, or 15 cents, to $3.60.

Crestview returns to radio someone who was in the industry briefly as CEO of AMFM, which is now part of Clear Channel: Jeff Marcus, known mainly for his career in cable television at Marcus Communications. In fact, Crestview recently announced a major cable investment in Insight Communications.

Under the terms of the partnership with Cumulus, Crestview, a $4 billion private equity firm, will lead an investor group that would invest up to $500 million in equity in the partnership, to be called Cumulus Radio Investors, LP (CRI). Together with debt financing expected to be available through the capital markets, CRI could target acquisitions totaling in excess of $1 billion. Cumulus would provide all management, financial, operational and corporate services to the partnership and its operations pursuant to a management services agreement. Cumulus will be compensated through management fees as well as incentive compensation based on investment returns.

Cumulus already manages a similar private partnership, Cumulus Media Partners LLC (CMP), although it lost most of its equity interest in CMP in a financial restructuring during the recession. Cumulus had partnered in 2006 with three private equity funds to acquire Susquehanna Radio for $1.2 billion.

As usual, the new partners issued statements praising each other.

“We are pleased to announce the formation of Cumulus Radio Investors in partnership with Crestview and other investors to uniquely combine the synergies of one of the largest radio broadcast companies with the backing of a strong financial sponsor whose senior partners, Thomas Murphy, Jr. and Jeffrey Marcus, have significant investing and operating experience in the radio industry. We will be deliberate and disciplined in our investment approach, but we are prepared to move quickly to capitalize on the strategic investment opportunities that we believe are available today,” said Cumulus Media CEO Lew Dickey.

Murphy, by the way, is a former Goldman Sachs executive.

And here is one of those quotes we love so well, in as much as it purports to have been said in unison by Marcus and Murphy: “Crestview is excited to partner with Lew Dickey and the rest of the Cumulus Media management team to pursue investments in the radio industry. The Cumulus Media team has demonstrated the ability to grow radio businesses while achieving significant operational efficiencies. We are confident that our investment and operating experience in the radio industry combined with Cumulus Media’s management capabilities and strong technology platform will lead to compelling investment opportunities.”

RBR-TVBR observation: The obvious question is, what will they buy? There are certainly still several financially distressed groups who were unable to handle their debt loads during the recession and whose bankers and/or new (vulture capital) owners would like to see sold. But, what multiple would they accept now that the radio ad marketplace is clearly improving? Will Clear Channel and Citadel again try to shed some of their station portfolios? So many questions. But we’ll have to wait for the answers.

One quick note: This could be good news for Nielsen and bad news for Arbitron.