Cumulus Plans ‘Dutch Auction’ to Repurchase More Stock

Separately, Cumulus Media continues to seek to buy up shares of its stock from the market. It said its board plans a “Dutch auction” tender offer through which it will offer to purchase up to 11.5 million shares of its Class A stock at a price between $11 and $12.50 per share.
Cumulus in late 2004 authorized the repurchase of up to $100 million of its shares; in late 2005 the board authorized the purchase of up to an additional $100 million.
In this year’s first quarter it repurchased about 2 million shares at an average price per share of $12.77; since launching the effort has repurchased 10.7 million shares worth about $136 million.
The shares of Class A stock to be repurchased in the auction equal about 24% of the shares outstanding. Cumulus will determine the lowest per-share price that will enable it to buy between 2.875 million and 11.5 million shares.
Chairman Lew Dickey said the move is a way of maximizing stockholder value and “serves as an efficient mechanism for us to return cash to those stockholders electing to participate at a premium over recent trading prices without the usual costs associated with open-market transactions.”
The company also said it will repurchase up to 5 million shares of its Class B common stock from affiliates of Bank of America Corp.
According to Shula Neuman of the Olin School of Business in an online essay, companies opt to repurchase their stock to signal that their stock is undervalued, to fulfill the exercise of options, to return excess cash to shareholders or to inflate their earnings-per-share.