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| WLS-AM & WLS-FM Now Officially Owned By Cumulus Media, Inc. |
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| Written by Larz | |||
| Friday, 16 September 2011 09:02 | |||
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WLS-AM & WLS-FM are no longer officially owned by Citadel Broadcasting Corp., after being taking over by Cumulus Media, Inc., who today purchased the stations' previous owner for $2.4 billion in cash and stocks. Cumulus released an announcement minutes ago of the completion of the transaction that was started near the beginning of this year.
In mid-February, word leaked out that Cumulus was looking to take over Citadel, despite Citadel's previous refusing to sell the rival company. (This site was one of the first in the country to have this news. See the original report HERE.) In early March, the transaction was officially confirmed by Cumulus and Citadel. Now, after months of securing financing, making changes to appease the US Department of Justice and the Federal Communications Commission, and getting Citadel shareholders to agree on a stock/cash option, the takeover is finally complete. With the completion of the Citadel acquisition, Cumulus Media becomes the second largest radio broadcaster in the United States, owning and/or operating over 570 radio stations in 120 markets. (Clear Channel remains the largest radio broadcaster with over 850 radio stations.) This morning's statement from Cumulus Media described the transactions of stocks and cash this way: Based on preliminary results of the elections by Citadel stockholders and warrant holders, and the application of the proration procedures provided for in the merger agreement with Citadel, Cumulus Media expects to pay a total of approximately $1.418 billion in cash and issue approximately 26,229,056 shares of its Class A common stock and warrants to purchase 71,683,741 shares of its Class A common stock to Citadel securityholders in connection with the Citadel acquisition. As a result of the application of those proration procedures, Citadel stockholders and warrant holders who elected to receive cash in the Citadel acquisition (or who did not make an election) will receive, per Citadel share or warrant, as applicable, $30.40 in cash and 1.521 shares of (or warrants exercisable for) Cumulus Media common stock. Citadel stockholders and warrant holders who elected to receive stock in the Citadel acquisition will receive, per Citadel share or warrant, as applicable, 8.525 shares of (or warrants exercisable for) Cumulus Media Class A common stock. Cumulus Media will pay cash in lieu of issuing fractional shares of its Class A common stock as provided for, and pursuant to the procedures set forth in, the merger agreement. In connection with the closing of the Citadel acquisition and the completion of Cumulus Media's previously announced global refinancing related thereto, Cumulus Media also repaid approximately $1.4 billion in outstanding senior or subordinated indebtedness and other obligations of Cumulus Media and certain of its other wholly-owned subsidiaries, and of Citadel. Cumulus Media's $610.0 million of 7.75% senior notes due 2019, issued in May 2011, remain outstanding. This global refinancing, and the cash portion of the purchase price payable in the Citadel acquisition, is being funded with (i) $1.325 billion in borrowings under a new first lien term loan, $200.0 million in borrowings under a new first lien revolving credit facility and $790.0 million in borrowings under a new second lien term loan, and (ii) proceeds from the sale of $475.0 million in shares of Cumulus Media's common stock, preferred stock and warrants to purchase common stock to certain investors (the "Equity Investment") in a private placement exempt from the registration requirements under the Securities Act of 1933. Pursuant to the Equity Investment, Cumulus Media issued and sold (i) 51,843,318 shares of its Class A common stock to an affiliate of Crestview Partners II, L.P. ("Crestview"); (ii) $125 million of a newly-created class of perpetual redeemable non-convertible preferred stock, on which dividends are payable in cash or through the issuance of additional shares of preferred stock and accrue at an initial rate of 10% per annum for the first six months from issuance, with increases in such rate every two years thereafter, to an affiliate of Macquarie Capital (USA) Inc.; and (iii) 2,445,392 shares of its Class A common stock and warrants to purchase 26,356,449 shares of its Class A common stock to UBS Securities LLC and certain other investors to whom UBS Securities syndicated a portion of its investment commitment. In addition and also as a part of the agreement governing the Equity Investment, Cumulus Media issued to Crestview warrants to purchase 7,776,498 shares of Cumulus Media Class A common stock, with an exercise price of $4.34 per share. Effective upon the completion of the Citadel acquisition, Cumulus Media appointed Arthur J. Reimers, an independent investor and consultant, and Jeff Marcus, a partner of Crestview, to its Board of Directors, and named Mr. Marcus as the Lead Director of the Board. After giving effect to the issuance of shares of Class A common stock and warrants exercisable for shares of Class A common stock in the Citadel acquisition and pursuant to the Equity Investment, Cumulus Media would have had approximately 238,839,650 shares of Class A common stock outstanding on a fully-converted to Class A common stock basis." Knowing the closing of the sale was imminent, Citadel Broadcasting Chairman and CEO Farid Suleman sent out the following memo to Citadel Broadcasting staffers this week, basically saying goodbye and thank you. In the email, Suleman wrote: "As we get ready for the sale of the company to Cumulus, I want to take this opportunity to thank every one of you for all of your hard work, dedication and your friendship over the past years. Your contributions to this company have been invaluable and have frankly made my job easy. I am also grateful to you for your friendship. Over the past few weeks, I have received personal messages from many of you and I am deeply appreciative of your good wishes. I wish you and your families the very best for the future. Sincerely, Farid." So what does this mean for the two newly-acquired Chicago radio stations for Cumulus: WLS-AM & WLS-FM? Initially, it means little. It will still be business as usual for the programming and staff there. With these two stations being among the most profitable of Citadel's roster, there is little reason for Cumulus to make any fast changes. However, Cumulus Media CEO Lew Dickey has a reputation for altering radio stations it acquires. It is widely expected that both WLS radio stations will see changes in the coming months and year. Those changes could very well include upper management changes, hiring/raise freezes, removing of local shows/hosts and replacing them with cheaper syndicated programming, and potential format flips down the line, especially for WLS-FM. As one local radio insider has said in regard to possible changes looming for WLS-AM/FM under the new ownership: "Hope for the best, but expect the worst." 
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