Buy Back: Cox Radio To Go Private

radioHoping to escape constant pressure from investors to show short-term growth, Cox Enterprises said it will buy back outstanding shares of Cox Radio and take the company private, with an offer of $3.80 per share, for a total buy of roughly $69 million.

The offer to buy out investors is contingent on meeting certain milestones in the share repurchase program. Cox Enterprises currently owns 78% of Cox Radio. It said it will take the company private if it is able to buy another 12% stake by April 17.

The offering price for the share buyback represents a premium of about 26% over the price of $3 at the beginning of the month, but it is 71% less than last year's peak price of $13 last May and June. Like other big radio broadcasters, Cox has seen its share price decline steeply over the last couple of years, with the downward trend accelerating during the recession.

However, Cox is still better off than most of its competitors. On Monday afternoon, Cumulus shares were trading at $1.44, Emmis at $0.59, Radio One at $0.36 and Entercom at $1.09. Both Radio One and Entercom have recently been threatened with delisting by Nasdaq and the New York Stock Exchange, respectively, when their stock price fell below $1.00.

Westwood One was delisted from the New York Stock Exchange in November--followed by Citadel earlier this month, when prices fell below the minimum price. Both companies' shares trade for pennies on the "pink sheets."

Still, Cox must tread carefully with its plan to go private, as other big radio broadcasters have found themselves at risk of defaulting on debts they assumed during share buybacks. Beasley, which bought back millions of shares from 2005-2008, is said to be at risk of breaching its lending covenants--especially as the mandated ratio of debt to revenue steps down over the next couple of years. It recently had to renegotiate lending agreements with creditors that demanded the company agree not to buy back more stock until the debt is paid down.

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