Citadel Broadcasting rejects merger proposal, sparking feud

Citadel Broadcasting Corp.'s rejection of a $2.1 billion takeover offer from Cumulus Media Inc. has sparked a war of words among the Las Vegas-based media company, its larger rival and a hedge fund with an ownership stake.

With offices on West Cheyenne Avenue, Citadel operates 223 stations nationwide, including KABC-AM and KLOS-FM in Los Angeles and WABC-AM in New York.

The deal would combine the nation's second- and third-largest radio companies. A deal, Cumulus argues, would help the combined company reduce expenses.

Cumulus confirmed it had made the offer late last month, but Citadel's board declined it. The company reiterated its bid publicly Friday, offering $31 per share in cash and stock for Citadel.

The company left open the possibility of increasing its offer if Citadel would agree to provide more information about its business. Including Citadel's debt, the deal was valued at $2.1 billion.

The offer for Citadel represents a 16 percent premium on Citadel's 20-day trading average stock price at the time of the original offer. Class B shares of Citadel trade over-the-counter on the Pink Sheets.

The company said Friday that the offer was still too low. In a statement, it also questioned whether Cumulus had the resources to finance the deal.

In a letter to Citadel's board dated Dec. 16, Cumulus CEO Lewis W. Dickey said he didn't understand why Citadel had been "unwilling to engage" with his company and consider the deal's "benefits to Citadel and its shareholders."

Citadel, the nation's third-largest radio group, emerged from bankruptcy in June under the control of its lenders, the hedge fund R2 Investment, JP Morgan Chase and the buyout firm TPG.

R2 Investments released an angry letter on Friday urging the Citadel board to consider the merger.

"In our opinion, you appear once again to be exhibiting an utter disregard for shareholders' interest for what we believe must be some sort of personal agenda," R2 said. "A board concerned about its shareholders should have engaged Cumulus to negotiate the best possible deal and then would have let the shareholders vote on whether the deal is acceptable."

Citadel responded to R2, calling the hedge fund's claims "baseless" and "nothing more that a heavy-handed ploy by R2 to advance its own interests at the expense of Citadel and its shareholders."

"The board has received another letter from Cumulus regarding its most recent proposal that does not contain any material new information," the company wrote in a statement. "Citadel remains committed to carefully considering any acquisition proposals.

Contact reporter Chris Sieroty at csieroty@reviewjournal.com or 702-477-3893.