NY Times: Citadel Shareholders Call CEO 'Ineffective'
Post Cumulus Buyout Offer, Criticism Of Farid Suleman Gets Heated
January 24, 2011 at 3:35 AM (PT)
Back in DECEMBER, CITADEL BROADCASTING said it rejected two unsolicited merger offers from an undisclosed party (NET NEWS 12/6/2010). Both of those offers turned out to be from CUMULUS BROADCASTING.
Two weeks later, CUMULUS confirmed that on NOVEMBER 29th, it made a proposal to the Board of Directors of CITADEL BROADCASTING CORP. to acquire all of the outstanding equity of CITADEL for $31 per share (NET NEWS 12/17/2010). That disclosure touched off a war of words between CITADEL, CUMULUS and R2 INVESTMENTS, with all three companies trying to spin the event in their favor.
First they try to overpay themselves and management to the tune of $100 million. Then they put up roadblocks to a merger, which can only be a desperate attempt to keep their jobs, in our opinion.
The major events during this timeline:
On DECEMBER 6th, CITADEL informed CUMULUS that "the board of directors of [CITADEL] rejected this proposal as not being in the best interests of [CITADEL's] shareholders."
On DECEMBER 16th, CUMULUS delivered a letter to CITADEL's Board of Directors reiterating its offer and its desire to reach agreement on a transaction that would deliver superior value and substantial liquidity to CITADEL's shareholders.
CUMULUS Chairman/CEO LEW DICKEY commented, "This offer continues to represent a superior alternative in value, liquidity and potential growth for the former secured creditors of CITADEL who, post-bankruptcy, are now the owners of the company."
Then, R2 INVESTMENTS, LDC, one of the largest owners of CITADEL BROADCASTING's outstanding shares, sent a letter to the company's Board of Directors, urging it to reconsider the merger proposal and stop acting in its own self-interest.
Claims That Farid Suleman Is 'Ineffective'
Now, THE NEW YORK TIMES is reporting shareholders in CITADEL BROADCASTING "contend that they are being victimized by their board’s refusal to entertain a buyout offer from a competitor, CUMULUS MEDIA. They say they are worried that the CITADEL directors' inaction is intended to let an ineffective chief executive hang on to his job," referring to CITADEL CEO FARID SULEMAN.
CITADEL filed for bankruptcy protection in DECEMBER 2009, and emerged about six months later with a far lighter debt load. THE TIMES writes CITADEL, "emerged from its Chapter 11 status with a raft of new shareholders, many of whom had bought the company’s debt. The former stockholders were wiped out. While many companies undergoing a fresh start do so with a new chief executive, CITADEL did not. The man who ran the company in the years leading up to its bankruptcy, FARID SULEMAN, is still the CEO. And he has become a lightning rod for shareholder criticism."
That criticism includes claims that SULEMAN doesn't return shareholder calls.
THE TIMES also claims that,"because Mr. SULEMAN owns no shares of CITADEL -- his holdings consist solely of options -- some of the company's owners suspect that he is warding off an attractive acquire to keep his job."
SULEMAN did not talk to THE TIMES for the story, but a spokesman told the paper, "the board rejected the notion that it was protecting the CEO's position."
Q INVESTMENTS Founder/Sr. Managing Partner GEOFFREY RAYNOR was also critical of CITADEL's management. "First they try to overpay themselves and management to the tune of $100 million. Then they put up roadblocks to a merger, which can only be a desperate attempt to keep their jobs, in our opinion. After all, if they lose their seats on the board, how else are they going to be able to siphon off another $100 million when no one is looking?"
Through a spokesman, CITADEL's board made this statement to THE TIMES, "We are sharply focused on maximizing shareholder value. We retained two financial advisers to help us evaluate the CUMULUS proposal and thoroughly considered it at multiple board meetings. At our request, CITADEL's financial advisers have had a dialogue with CUMULUS' financial advisers regarding its proposed financing and other aspects of the proposal. We remain open to credible acquisition proposals from any third party at an appropriate valuation."