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Cumulus Media Strikes Deal to Acquire Citadel

Law firms challenge fairness of stock price to Citadel shareholders

Cumulus Media Inc. announced it has entered into an agreement to purchase Citadel Broadcasting Corp. for $37 a share.

The deal involves two of the largest radio groups in the country (see rankings as of 2009 here). At deal’s end, Cumulus would own 572 radio stations across 120 markets.

Cumulus Chairman/CEO Lew Dickey said the deal gives his company a “vastly expanded national footprint” with the “scope and financial strength necessary to make critical investments in content and technology necessary to compete in today’s rapidly evolving media landscape.”

Terms were not announced for the combination cash/stock deal, though the parties said Citadel was worth about $2.4 billion.

Other details, such as a management structure, have yet to be announced; more details are likely to be forthcoming in an analyst call March 14.

Not everyone thinks the deal is fair to Citadel shareholders.

Six law firms so far — the Brisco Law Firm, Finkelstein Thompson LLP, Harwood Feffer LLP, Rigrodsky & Long, P.A., Levi & Korsinsky and Robbins Umeda LLP — say they’re investigating potential legal claims against the Citadel board related to the proposed Citadel buyout. Specifically they’re looking into whether Citadel’s board got the best deal for its shareholders “and properly shopped the company before entering into the acquisition agreement,” according to the Brisco Law Firm.

When the deal closes, expected by year-end, Cumulus acquires Citadel’s 225 O&Os, plus the former ABC Radio network, now part of Citadel Media.

Cumulus said in the announcement the deal would provide the broadcaster some $50 million worth of “synergies” and an “optimal platform for further consolidation and increased vertical integration.”

We reported previously on the pending acquisition. Since then, Cumulus obtained commitments for up to $500 million in equity financing from Crestview Partners and Macquarie Capital, and commitments from a group of banks for up to $2.525 billion in senior secured credit facilities and $500 million in senior note bridge financing. The proceeds will be used to pay the cash portion of the merger consideration, and support refinancings.Cumulus is in the process of buying out its private equity partners — Bain Capital Partners LLC, Blackstone Group L.P. and Thomas H. Lee Partners — in an entity that was formed to acquire Susquehanna Radio Corp. in 2005 for $1.2 billion. It expects to refinance all the debt burdens of that entity, as well as its own debt load and that of Citadel.

The deal is subject to Citadel stockholder approval, regulatory approval from the FCC and the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.