Cumulus Media agrees to $1.3 billion buyout

NEW YORK (Reuters) - Radio broadcaster Cumulus Media Inc. (CMLS.O) said on Monday it agreed to a $1.3 billion buyout led by its chief executive and Merrill Lynch, reviving expectations of further deals in an industry struggling with weaker advertising.

The agreement is the latest in a wave of media industry buyouts, many of which have put leading U.S. newspaper publishers and radio broadcasters into private hands as they grapple with weak advertising and competing digital formats.

The news pushed up shares in industry peers such as Emmis Communications (EMMS.O), Cox Radio CXR.N and Citadel Broadcasting CDL.N, some of which had already considered going private or been a target of investor merger speculation.

Cumulus CEO Lewis Dickey, other Dickey family members and an affiliate of Merrill Lynch Global Private Equity are offering $11.75 in cash per Cumulus share, a 40 percent premium over its closing price on Friday, the company said. Cumulus shares jumped 32.1 percent to $11.06 on the Nasdaq.

Dickey said a privately-held Cumulus would aim for further acquisitions to gain clout in a rapidly-changing industry.

"We feel we have two very strong vehicles ... that can continue to be aggressive in consolidation, provided the deals make sense," Dickey told Reuters in an interview, referring to the company and its Cumulus Media Partners venture with leading private equity groups.

"There is compelling logic behind scale in this industry," he said. "It just hasn't been realized yet."

Atlanta-based Cumulus owns or operates more than 340 radio stations in 67 U.S. media markets. The deal has been approved by Cumulus' board and is expected to close in early 2008.

OPEN TO RIVAL BIDS

Private equity still sees radio companies as attractive because their strong cash flow levels allow for highly leveraged deals, said RBC Capital Markets analyst David Bank.

But he questioned whether other publicly traded broadcasters would follow Cumulus, since the radio industry's woes won't lead to an easy exit strategy.

"Unless radio undergoes some sort of structural shift, I think we're headed into a prolonged period of low-single-digit growth at best and fundamentals that don't look terrific," Bank said. "The bigger question is, what's the exit strategy, and that's where all of this might get tripped up."

Shares in Emmis, whose CEO had dropped an effort to take the company private last August, rose 6.4 percent to $9.14.

Cox Radio shares gained 8.2 percent to $14.86, Citadel Broadcasting rose nearly 4 percent to $6.21 and Westwood One WON.N increased 3.7 percent to $5.67.

U.S. radio station operator Clear Channel Communications Inc. (CCU.N) is still waiting on shareholder approval for its proposed $19.6 billion buyout.

Tribune Co. TRB.N shares are trading well below the price offered in an $8.2 billion buyout of the newspaper publisher and broadcaster amid concerns its cash flow may not meet a leverage test detailed in the deal terms.

Cumulus said its agreement allows the company to solicit better proposals from other potential suitors in the next 45 days and that its board would actively seek other bids.

Cumulus said it would not disclose any developments concerning its efforts to get an improved bid unless the board decides to pursue such a proposal.

Dickey will remain the company's chairman, president and CEO after the buyout closes. His brother John Dickey, who serves as Cumulus co-chief operating officer, and other members of the family are also investors in the deal.

Merrill Lynch & Co. MER.N was the financial adviser to the investor group while Jones Day and Debevoise & Plimpton LLP served as legal advisers.

A special committee of Cumulus' board was advised by Credit Suisse Securities LLC on financial matters and by Sutherland Asbill & Brennan LLP and Richards, Layton & Finger on legal issues.