Deal expected to close in the first half of 2006.
With financial backing from three investment firms, Cumulus Media, radio's 11th largest radio group, is acquiring Susquehanna Radio for approximately $1.2 billion.
To pull off the widely expected acquisition, the companies formed Cumulus Media Partners, a new private partnership created by Cumulus Media, Bain Capital, the Blackstone Group and Thomas H. Lee Partners. The deal is expected to close in the first half of 2006.
One of the most sought-after collection of radio stations in the nation, Susquehanna is the industry's largest privately owned operator, with 33 stations in 8 markets, including San Francisco, Dallas, Houston, Atlanta, Cincinnati, Kansas City, Indianapolis and York, Pennsylvania.
In exchange for a 25 percent equity stake in the new company, Cumulus Media will contribute two FM stations in Houston and two FM stations in Kansas City, both overlapping markets with Susquehanna. With performance incentives, Cumulus Media can increase its stake in CMP up to 40 percent.
Through a management agreement, Cumulus Media will manage the new group for $4 million a year, bringing the number of markets in which Cumulus manages stations from 61 to 67. In effect, Cumulus Media will be managing the third largest portfolio of radio stations in terms of revenue after No. 1-ranked Clear Channel and No. 2-ranked Infinity Broadcasting. Cumulus, which operates 293 stations, had annual 2004 revenue of $284.5 million. Susquehanna had annual revenue of $228.9 million.
"Susquehanna is one of the radio industry's most admired companies because of the quality of its assets and the quality of its people," Cumulus chairman/CEO Lew Dickey said in a statement. "We look forward to partnering with the management and employees of Susquehanna to continue their great tradition of serving listeners, advertisers and communities. The formation of Cumulus Media Partners has also helped us accomplish our goals of monetizing our station assets in Houston and Kansas City and enabling our shareholders to benefit from the next wave of industry consolidation."
Providing debt financing for the deal are Deutsche Bank, Merrill Lynch, Goldman Sachs, and UBS. Deutsche Bank Securities acted as exclusive financial advisor to Cumulus Media, while Deutsche Bank Securities and Goldman Sachs acted as financial advisors to Cumulus Media Partners.
Separately Susquehanna Pfaltzgraff Co. has agreed to sell Susquehanna Communications, the cable TV and broadband services division of Susquehanna Pfaltzgraff, to Comcast Corporation.