Cumulus Buys Out Partners in Cumulus Media Partners
January 31, 2011 at 3:08 PM (PT)
CUMULUS MEDIA INC. is buying out its equity partners in CUMULUS MEDIA PARTNERS, the company formed to buy the old SUSQUEHANNA stations in 2006. CMP owns 32 stations in nine markets, including SAN FRANCISCO, DALLAS, HOUSTON, ATLANTA, CINCINNATI, INDIANAPOLIS and KANSAS CITY. CUMLUS MEDIA has operated the CMP stations under a management agreement since the original deal.
CUMULUS is issuing 9,945,714 shares of its common stock to the partners in CMP, BAIN CAPITAL PARTNERS, LLC, THE BLACKSTONE GROUP L.P., and THOMAS H. LEE PARTNERS, who collectively own 75% of CMP. BLACKSTONE will get Class A common stock and BAIN and LEE will get a new class of non-voting common stock in CUMULUS. CUMULUS also intends to acquire all of the outstanding warrants to purchase common stock of a subsidiary of CMP, in exchange for an additional 8,267,968 shares of CUMULUS common stock. The value of CMP based on the closing price of CUMULUS stock on FRIDAY (1/28) is about $740 million, including an estimated $660 million of CMP net debt and preferred stock as of DECEMBER 31, 2010, a valuation of approximately 7 times CMP's estimated 2011 station operating income.
CUMULUS Chairman and CEO LEW DICKEY said, "We are pleased to announce the combination of CUMULUS and CMP after having run these two radio groups as essentially one company for the last five years. CMP has long been one of the most coveted sets of assets in the radio industry and we expect it will immediately become an important driver of growth and profitability for the Company."
"In particular," he continued, "we believe that consolidating Cumulus and CMP benefits our stockholders by providing the opportunity to:
"Improve our revenue growth; Immediately increase our station operating margins; Increase our free cash flow yield; Provide a more diversified and strategic national media platform; Maintain the attractive debt capital structures of CUMULUS and CMP; Increase the equity market capitalization and liquidity of CUMULUS' common stock; and strengthen our capital base to position the Company for strategic acquisitions."
The transaction is expected to be completed in the second quarter of 2011. Holders of about 54% of CUMULUS' shares have agreed to vote to approve the share issuances and an amendment to CUMULUS' certificate of incorporation, which are required to complete the transaction.
In addition, CUMULUS announced that BLACKSTONE Sr. Managing Director DAVID M. TOLLEY has joined the CUMULUS Board of Directors.