Cumulus Wants Citadel -- But the Feeling Isn't Mutual


Repeated buyout offers from Cumulus Media have led to a war of words between Citadel Broadcasting and its shareholders, after Citadel rebuffed the Cumulus advances in no uncertain terms.

Citadel executives are saying Cumulus' offer of $2.1 billion was far too low. The spurned Cumulus executives are teaming up with big Citadel stakeholders to accuse Citadel's management of neglecting the interests of the company's shareholders.

The most recent proposal from Cumulus, outlined in a letter to Citadel management on Nov. 29, was rejected by the latter as being "neither credible nor at an appropriate valuation." Citadel also noted that Cumulus is already carrying a large amount of debt -- roughly $700 million -- and even flirted with violating its debt covenants earlier this year. (They were suspended through a voluntary agreement with creditors.) Citadel added that even if financial support for the deal was forthcoming, the outcome of an attempted merger would be uncertain, at best, due to regulatory issues.



This, in turn, triggered a critical letter to Citadel's board of directors from one of the company's main shareholders, R2 Securities, which said the company "should have engaged Cumulus to negotiate the best possible deal," especially considering its own financial woes.

Citadel is carrying about $600 million of debt, and recently completed a complicated refinancing agreement, which precludes selling the company, even if it would benefit shareholders -- a deal that R2 dismissed as "really beneath contempt in our view," with the sole purpose of protecting "your own jobs and self interest."

Cumulus CEO Lew Dickey wrote another letter noting "increasingly stronger encouragement" from Citadel shareholders -- presumably led by R2. Citadel fired back that R2 was also merely seeking "to advance its own interests" through false claims.

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