Cumulus Media's pursuit of a reluctant Citadel

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As Citadel Broadcasting prepares for a shareholders’ vote on the proposed takeover by Cumulus Media, details of the courtship have been filed with the SEC. To say the least, Citadel fought mightily against going to the altar with Cumulus.


It was back before Halloween, on October 27, 2010 that Cumulus CEO Lew Dickey first raised the idea of acquiring Citadel to his board of directors. Representatives of UBS Securities, Cumulus’ financial advisor, were on hand to discuss the post-Chapter 11 financial structure of Citadel, along with Cumulus’ outside legal counsel, Jones Day. After going over the details, the directors gave Dickey the go-ahead to approach Citadel.

That first approach came November 3, 2010, when Dickey called Citadel board chairman Jack Sander (best known for his years at Belo) to discuss a potential “at-market” transaction with Citadel. That was followed up by a November 9, 2010 letter proposing a cash/stock merger which valued Citadel at about $25.39 per share.

In the meantime, though, on November 8th, the Citadel board and senior management had already met, along with its financial and legal advisors, and the Citadel board had directed Sander to tell Dickey that it was not interested.

Having disposed of Dickey’s overture, Citadel announced a bond offering of a half billion dollars on November 24th, with the intention of using the proceeds to repay some of its credit facility.

But Lew Dickey wasn’t going away. The spurned suitor was back on November 29th with a second letter proposing a deal which valued Citadel at $31 per share. That rejected offer from an unnamed company was publicly disclosed in early December by Citadel and word quickly got out that Cumulus Media was the rejected buyer. That disclosure was made after the Citadel board conferred with its advisors and again said no to Dickey, while moving ahead with the bond offering, which contained a penalty for early repayment. The bond offering was completed, but for $400 million, rather than $500 million.

But still Lew Dickey didn’t go away. Indeed, some of Citadel’s major shareholders began to press the board to negotiate with Cumulus. R2 Investments went public with its demand that the board consider the Cumulus offer and “stop acting in its own self-interest.” Dickey sent another letter on December 16th reiterating the $31 per share offer and noting the “increasingly stronger encouragement” from Citadel’s big shareholders. But the Citadel board reiterated its “no.”

During December 2010 and January 2011 Citadel reported that it received letters from various shareholders disagreeing with the board’s stance and urging the directors to negotiate with Cumulus or call a special shareholders meeting to discuss the board’s approach to potential transactions.

A second bidder then emerged, identified in the SEC filing as “Company A” but now known to be Entercom. CEO David Field sent a letter on January 19, 2011 offering to acquire Citadel for $31 in cash and stock. The letter set a deadline of January 26th for the offer to expire.

On the very same day, an unidentified shareholder of Citadel, called “Company B,” told Citadel CEO Farid Suleman it did not support the idea of a sale to Cumulus at $31 and later that day told one of Citadel’s directors that Company B was interested in making a $500 million preferred stock investment in Citadel. That would have kept the company independent.

Discussions of one sort or another then became almost daily, with the Citadel board holding a formal meeting by phone on January 24th to discuss all three offers on the table, with a follow-up phone session the next day. By January 31st Citadel and Cumulus had entered into a confidentiality agreement to exchange non-public information. But that didn’t preclude Citadel striking a deal instead with Entercom or Company B. It was also on January 31 that Cumulus Media announced its deal to roll-up Cumulus Media Partners, of which it was a minority owner.

Negotiations continued hot and heavy, with Entercom raising its offer for Citadel to $32 per share – and possibly $33 if regulatory approvals dragged on for too long. That was rejected as inadequate, but Entercom then upped the ante to $35. That price was quickly matched by Cumulus.

Entercom entered into a confidentiality agreement to also exchange non-public information with Citadel and on February 14th upped its offer to $36 per share. Citadel was set to sign an exclusive agreement to negotiate final terms with Entercom and notified Cumulus, via its UBS representatives, on February 15th that it had lost the bidding. That set in motion a flurry of phone calls. Cumulus matched the $36. Citadel demanded $38. Cumulus offered $37. Entercom didn’t raise its bid. Some details were worked out and the exclusive negotiations between Citadel and Cumulus were announced on February 17th.

Even then the deal was far from complete. The SEC filing goes on for many pages describing the negotiations. The exclusivity period expired on March 5th and David Field was asked if Entercom was interested in making a new offer for Citadel. None was received, though, and negotiations continued with Cumulus.

Finally, on March 9th, the merger agreement was nailed down and signed. The deal at the $37 price was announced the next day.

RBR-TVBR observation: Still to go are regulatory approvals and a vote by Citadel Broadcasting’s shareholders. The date for the latter should be set soon, since Citadel has filed the preliminary paperwork with the SEC. Approval by the FCC is less predictable, but Lew Dickey has his fingers crossed to get to the closing table around Labor Day, which is September 5th this year.

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