On Feb. 2, a put-and-call agreement giving Cumulus Media ownership of WKQX-FM “Q101” and WLUP-FM in Chicago was terminated.
On Tuesday evening at 8:45pm Eastern, Cumulus announced that it has reached a new deal that will give it Q101 for $18 million, court documents filed April 3 confirm.
Even more, Cumulus will gain the intellectual property of the former WLUP-FM, which signed off the air March 10 following the facility’s acquisition by Educational Media Foundation, for no additional cost.
That’s assuming some key “termination rights” clauses are not activated.
News of the deal was distributed via a Globe Newswire release available on Nasdaq.com. Minutes later, an 83-page court filing was posted by the U.S. District Court for the Southern District of New York.
In the release, Cumulus confirmed that it has entered into a “definitive agreement” with Merlin Media to acquire Q101 and the WLUP brand, format and all music and imaging tied to the longtime Chicago-area station best known as a Rocker during its 41 years serving the market.
The company, which is seeking approval from a New York federal bankruptcy judge of its Chapter 11 restructuring plan, also noted that Q101 has served Chicago since 1977 with a variety of rock-oriented formats.
In a prepared statement, Cumulus President/CEO Mary Berner said of Q101, “After operating the station for the past four years, we are delighted to be able to bring this beloved station under Cumulus’s ownership on economic terms that make sense for our business.”
That suggests that Cumulus was able to obtain Q101, with the bankruptcy court’s blessing, at a price lower than that originally contracted for.
As RBR+TVBR reported on Feb. 2, Cumulus asked the bankruptcy court to nullify the original deal, as “the legacy terms to acquire WKQX-FM and WLUP-FM in Chicago for approximately $50 million is significantly in excess of the stations’ market value.”
Further, Cumulus noted that stations have lost $8.4 million since 2014 and were no longer worth $50 million, the price Cumulus was handed when the put-and-call option was executed.
Cumulus continued to operate both WLUP and Q101 via an LMA with Merlin. The original monthly LMA fee of approximately $583,000 was reduced by the New York bankruptcy court judge, Shelley Chapman, to $15,000 per month for “reimbursement costs.” An LMA extension to April 30 was made, with options to extend the LMA to July 31 and October 31 now contingent on the closing.
Chapman on Jan. 19 wrote, “The Debtors are authorized to immediately take all actions necessary to effectuate the relief granted in this Order in accordance with the Motion. The rejection of the Merlin agreements as authorized herein constitutes a sound exercise of the Debtors’ business judgment, made in good faith and for legitimate commercial reasons, is appropriate and necessary under the circumstances described in the motion and is warranted and permissible under the bankruptcy code.”
In January 2014, Cumulus agreed to an arrangement with Merlin that saw it enter into an LMA with the FM duo. This deal included the “Put and Call Agreement,” which Cumulus in late October executed.
This essentially created a trigger event that would enable Cumulus, when it opted to, to outright purchase WKQX and WLUP; the LMA went into effect under the pretense that it would be in effect until FCC approval was granted.
“I am truly pleased that we have reached an agreement to bring WKQX into the Cumulus family and fully focus on driving growth in the Chicago market,” said Cumulus/Chicago VP/Market Manager Marv Nyren. “We have lots of great programming planned for WKQX and our other stations in the Chicago market, and we look forward to growing these legendary stations and providing great content to our listeners and effective marketing strategies for our advertisers in and around Chicago.”
Merlin on March 6 revealed via a Form 314 filing with the FCC that it sold WLUP (now WCKL-FM 97.9) in Chicago to Educational Media Foundation, the prolific buyer of radio stations that operates the Christian AC KLOVE and Christian Top 40 Air1 noncommercial networks.
The purchase price is $21.5 million, and KLOVE is already on the signal.
Thus, Cumulus is shaving $10.5 million off of the originally agreed upon price for WLUP and WKQX.
A $4,750,000 escrow deposit will be made to U.S. Bank by Cumulus.
So … is this a done deal? Not entirely.
The asset purchase agreement includes termination rights that can be struck by mutual agreement of Merlin and Cumulus, and if no bankruptcy approval is granted by the court by May 30.
That’s a major caveat, and puts pressure on Cumulus to have a deal done in under two months.
Closing may occur at any date in the 2018 calendar year.
The asset purchase agreement also indicates that, with the sale of WKQX, a call letter change to WKQK may be in the works.