Atlanta company makes offer to buy Las Vegas radio broadcaster

By Steve Green

Published Friday, Dec. 17, 2010 | 8:42 a.m.

Updated Friday, Dec. 17, 2010 | 10:26 a.m.

Cumulus Media Inc. of Atlanta today said it wants to buy competing radio station owner Citadel Broadcasting Corp. of Las Vegas in a deal valuing Citadel at $2.1 billion.

Cumulus said it made the offer last month, but it was rejected by Citadel. Cumulus went public with its bid today, offering $31 per share in cash and stock.

Citadel is the nation's No. 3 radio broadcaster and reorganized under Chapter 11 bankruptcy protection earlier this year. Citadel says it operates in more than 50 leading markets and has 165 FM stations and 58 AM stations.

Citadel is based in Las Vegas but has no radio stations in Las Vegas. Cumulus also does not operate in Las Vegas.

In a letter to Citadel, Cumulus said: "We do not understand why you have been unwilling to engage with us to explore such a transaction and to consider its benefits to Citadel and its shareholders. We had made an earlier proposal a number of weeks prior that you also rejected."

"In response to increasingly stronger encouragement that we have received from individual Citadel shareholders who have urged us to continue our efforts to combine our companies and thereby deliver substantial and tangible value to Citadel’s shareholders, we write you again."

The New York Times reported today that Dallas hedge fund R2 Investments is urging Citadel to consider a merger.

The Times reported R2 had earlier accused Citadel of “a shocking display of corporate greed and dishonesty” for issuing stock grants worth $110 million — including more than $55 million for its chief executive. Citadel later rescinded the stock awards.

Citadel emerged from bankruptcy in June under the control of its lenders, R2 Investments, JPMorgan Chase and the buyout firm TPG (Texas Pacific Group), the Times reported.

Citadel today called a letter from R2 "full of baseless claims and ... nothing more than a heavy-handed ploy by R2 to advance its own interests at the expense of Citadel and its shareholders."

Citadel said its board "carefully considered the revised Cumulus proposal with the assistance of its financial advisors, JP Morgan Securities Inc. and Lazard, and its legal counsel, Weil Gotshal & Manges LLP and Kirkland & Ellis LLP."

Citadel said the board determined the Cumulus proposal was not in the best interests of Citadel shareholders for "many reasons," including "the proposal was neither credible nor at an appropriate valuation."

Citadel, which generated $188.6 million in net revenue in the quarter ended Sept. 30, called Cumulus highly leveraged and said it provided no equity or debt financing commitments or terms.

"Citadel is executing a strategic plan its board of directors believes will create significant shareholder value over time. In June, Citadel successfully completed its reorganization plan and in December refinanced all of its existing higher-cost debt. This will result in a substantial reduction in annual interest costs with expected savings of approximately $35 million in 2011 and beyond. With a stronger balance sheet, Citadel is well positioned to operate its business and take advantage of market opportunities," the company said in a statement.