I’m not sure how I missed this bit of news, but I just learned that Cumulus, which boasts being the second largest owner of radio stations in the US, is bidding to buy the third largest, Citadel Broadcasting. Such a merger would create a conglomeration of 572 stations nationwide. This would still be about 300 stations shy of Clear Channel, which is still way too many for one company.
My perspective is that I cannot see how any additional consolidation in the radio industry would be a good thing. I also fail to see how the $2.5 billion price–which includes $500 million of equity financing and as much of $2.35 billion of secured debt financing–won’t be a large burden on Cumulus forcing the company to radically cut costs across the board, just like Clear Channel did a decade ago. Didn’t anyone learn anything from the lessons of Clear Channel and Tribune Company about the hazards of highly leveraged mergers in old media?
The media reform group Free Press has just filed comments with the FCC opposing the merger for the obvious reasons that it would threaten radio diversity and impact what little local service is left in commercial radio.
Some Citadel shareholders are also opposing the deal, complaining that they want more than the $37 per share price that Cumulus has offered, which is about 9% than the current Citadel market price. These shareholders say that the typical offer for a radio company is more like 80% above share price. I say, good luck with that.
Though I haven’t done an analysis of market overlap between the companies, I’d guess that some station divestiture would be required if the merger were to go through. The combined company would probably exceed ownership limits in some smaller markets. Unfortunately, I fear that will be the only significant factor weighed by either the FCC or Justice Department, rather than taking into account the overall deleterious effects of consolidation.
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