Cumulus is taking steps against a potential hostile takeover by a shareholder group. In a filing with the U.S. Securities and Exchange Commission Thursday, the media company listed steps it hopes will deter a Singapore-based investment group from buying up additional Cumulus stock.
The company states in the filing that it has adopted a “limited-duration rights plan” in response to a significant accumulation of its stock by Renew Group Private Ltd., which is controlled by Manoj Bhargava.
The shareholder rights plan is effective immediately and set to expire on Feb. 20, 2025. Such defense plans are often described as “poison pills” intended to make a company less attractive to activist investors and prevent them from grabbing a controlling interest.
Bhargava is a billionaire Indian American businessman who founded 5-Hour Energy. His Renew Group has other media holdings including a stake in Cumulus competitor Audacy. Bhargava’s group acquired $60 million of Audacy’s first-lien debt last year, according to Yahoo Finance.
As of January of last year, Renew Group held a 10% stake in Cumulus. Renew Group has openly stated to Cumulus leadership that it hopes to eventually acquire a 20% stake, according to Cumulus.
Cumulus Chairman Andrew Hobson said in a prepared statement: “Given the facts, the Cumulus Board firmly believes it is necessary to adopt a limited-duration rights plan to protect the interests of all Cumulus shareholders.”
The plan is intended to guard against tactics to gain control without paying all shareholders an appropriate premium for that control, he said.
Under the plan adopted by its board, Cumulus is issuing one right for each share of Class A and Class B common stock as of the close of business on March 4, 2024.
The plan will be executed once any person or entity acquires 15% or more of the company’s outstanding Class A common stock. Cumulus calls that “the triggering percentage.”
If the 15% mark is hit, all holders of rights to Cumulus stock at that time, precluding the group that caused the trigger, are able to buy Cumulus stock at a significant discount. That tactic will quickly dilute the acquirer’s stake in the broadcaster, according to Cumulus.
In addition, the media company could exchange each right for one share of stock. “However, anyone who currently owns more than the 15% triggering percentage is prevented from acquiring any additional shares without triggering the rights plan,” Cumulus stated.
It said the rights plan applies equally to all current and future shareholders and is not intended to deter offers or stop the board from considering offers that are fair and otherwise in the best interest of the company’s shareholders.
Cumulus has 403 radio stations in 85 markets. The company voluntarily reorganized under Chapter 11 in 2018.
