Shareholders sue over sale of LV broadcasting giant

Grace Leong

Friday, Jan. 19, 2001 | 11:07 a.m.

A day after Citadel Communications Corp. of Las Vegas announced an agreement to be acquired by New York investment firm Forstmann Little & Co. for $2 billion, two Citadel shareholders filed class action lawsuits against Citadel and five board members in hopes of getting the highest possible price for their stock.

Privately held Forstmann Little announced Tuesday it will acquire all outstanding shares of the company for $26 a share in cash under the $2 billion stock and debt deal.

But the shareholders, William Burcin and Rolling Investor Group Inc., in two lawsuits filed Wednesday in Clark County District Court, said the offer is "grossly unfair and inadequate."

Burcin said he opposed the proposed offer because the announcement came on the eve the company was expected to announce "phenomenal fourth-quarter results." He added the announcement was allegedly timed "to place an artificial cap on the price of Citadel's stock to enable (Forstmann) to buy the stock at the lowest possible price."

Burcin said Citadel announced on Nov. 27 it expected net revenues for fourth-quarter 2000 to be about $92 million and "the broadcast cash flow margin to be about 39 percent."

"If the deal was consummated, (Burcin) and other (shareholders) will no longer own shares in a 'growth' company, but rather will be cashed out of their Citadel shares for just $26 a share," Burcin said.

Citadel focuses on acquiring, developing and operating radio stations in mid-sized markets nationwide and currently owns or operates 143 FM and 64 AM stations in 44 mid-sized markets. Citadel, which has no Las Vegas radio stations, is the country's sixth largest radio broadcaster in terms of revenues.

Meanwhile, Rolling Investor's suit, which includes as defendants Forstmann Little, an affiliate, FLCC Holdings Inc. and its subsidiary FLCC Acquisition Corp., noted Citadel stock traded at $32.50 as recently as July 17 and as high as $51.50 a share in February 2000 when Citadel conducted a secondary offering of 4.75 million shares.

Rolling Investor, which said Citadel will continue to be run by the current management team under the deal, accused Citadel board members of agreeing to the proposed merger to "preserve their lucrative positions as officers."

The suit seeks an order to force the defendants to "evaluate Citadel's worth as an acquisition candidate, rescind all agreements that (allegedly) inhibit the maximization of shareholder value and implement an open bidding process." Burcin also wants an independent committee to be appointed to protect shareholders' interests and to consider subsequent offers.

The defendants declined to comment on the allegations.