Cumulus buyout bid enlivens radio sector

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NEW YORK -- Long-pressured radio stocks were among the best performers Monday on The Hollywood Reporter's Showbiz 50 stock index after station group Cumulus Media unveiled a $1.3 billion buyout led by chairman, president and CEO Lewis Dickey and a Merrill Lynch private-equity affiliate.

The buyers are offering to pay $507.7 million, or $11.75 per share in cash. That is a 40% premium over Cumulus' Friday closing price. The deal also includes debt, valuing the transaction at $1.3 billion overall.

"We strongly believe in this industry and in the long-term opportunities to grow the business," Dickey said.

The buyout news boosted Cumulus shares 32.9% to $11.12 after hitting a 52-week high of $11.74 intraday. Meanwhile, shares of Emmis Communications were the biggest gainer on the Showbiz 50, rising 6.5% to $9.15. The company also has repeatedly been mentioned on Wall Street as a possible going-private target after a failed bid by CEO and controlling shareholder Jeff Smulyan. Cox Radio, another buyout candidate, according to some, jumped 6% to $14.55. Westwood One gained 4.4% to $5.71.

Bank of America Equity Research analyst Jonathan Jacoby said Monday that radio stocks should gain ground for a few days on the news, but warned that "in our coverage universe, Emmis appears to be the only potential seller."

Meanwhile, Barrington Research analyst James Goss downgraded his rating on Cumulus from "neutral" to "underperform." He said "investors are getting full value on the stock" with the Cumulus deal.

He added: "We have always held Mr. Dickey in high regard for his industry knowledge and management skills. However, the radio ad industry struggles in recent years are well known, and the issues for Cumulus have been further complicated by (its) small market focus."

After pending acquisitions and divestitures, Cumulus will own or operate 344 radio stations in 67 U.S. markets.
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