• by Ross Fadner , November 1, 2005

In a move that could spark a wave of consolidation in the radio industry, Cumulus Media Inc. and a group of private equity firms Monday said they have entered into a new partnership through which they've agreed to buy Susquehanna Pfaltzgraff Co.'s radio broadcasting business for $1.2 billion.

Meanwhile, Comcast Corporation will be taking the remainder of Susquehanna's cable TV and broadband assets. Formerly a minority holder, Comcast now assumes full ownership of this unit for $775 million.

Significantly, the radio partnership brings in the added capital of Cumulus' investment partners for potential acquisitions in the future. According to a Wall Street Journal report, Cumulus is already looking at Walt Disney Co.'s ABC Radio.

In a conference call with reporters, Lew Dickey, Cumulus' chairman and chief executive, made it clear that the company will be looking to acquire new properties in the future. "I've been talking about continued consolidation for a long time and why it makes sense...to have our industry consolidate along the lines of most other industries where regulatory approval permits."

He also noted that further consolidation would make the media-buying process easier for advertisers: "Advertisers are increasingly looking for larger platform buys to give them more simple and efficient solutions to their needs," he said.

The joint partnership--separate from Cumulus Media Inc.--will be called Cumulus Media Partners, and will also include Bain Capital, Blackstone Group, and Thomas H. Lee Partners L.P.

Cumulus Media Inc. will own 25 percent of the venture, with performance incentives that could increase its share to 40 percent. Cumulus Media Partners will pay Cumulus Media for managing the new stations. In exchange for its stake, Cumulus has contributed two FM stations from Houston and two from Kansas City to the venture.

Atlanta-based Cumulus will be gaining listeners in four of the nation's top 10 markets--growing its number of owned and operated stations to 343, and reaching 67 markets. By comparison, Clear Channel Communications, the largest radio operator, has over 1200 radio stations and 100 million listeners.

Cumulus now adds 33 stations in 8 markets: San Francisco, Dallas, Houston, Atlanta, Cincinnati, Kansas City, Indianapolis, and York, PA. Susquehanna is the largest privately owned broadcasting company in the United States and the 11th largest overall in terms of revenue.

In the second deal, Susquehanna will be selling its cable TV and broadband services division, Susquehanna Communications, to Comcast, which already owned 30 percent. Comcast gains 225,000 basic cable subscribers, mostly in Pennsylvania, New York, Maine, and Mississippi. Private, family-owned Susquehanna Pfaltzgraff Company is being broken apart because there are no heirs willing to take over its businesses. Susquehanna already sold its dishware business in July; only the real estate unit remains following yesterday's announcements.