Cumulus Can't Discount Listeners In Citadel Deal

Cumulus Media's official announcement of its agreement to swallow up WLS-AM and FM parent Citadel Broadcasting said the cash-and-stock deal valued Citadel at approximately $2.4 billion, including assumed debt.

Citadel's announcement said it was valued in the deal at approximately $2.5 billion, based on a calculation of the worth of Cumulus shares.

But Phil Rosenthal at The Chicago Tribune writes one thing each company's outline of the transaction and its anticipated benefits had in common, however, is that neither mentioned "listeners."

Moody's Investors Service, the credit rating outfit, likes the deal. To pick up Citadel, which emerged from reorganization in June, Cumulus has lined up $500 million in equity investment commitments from Crestview Partners and Macquarie Capital and about $3 billion in debt financing.

A notion Moody's advanced in a note is that acquisitions enable radio to grow amid increasing competition from the Internet, satellite pay-radio and other formats. Then there's the $50 million or more in savings Cumulus says it thinks it can squeeze from synergies as a result of the deal, although it offered no details.

Rosenthal wonders if those synergies come at the expense of live local programs, as past consolidation often has, and listeners no longer feel connected to the stations in the same way, how much savings is there really?

WLS-AM 890 conceivably could simply open a spigot and run national programs all day. But the station has carved a niche in the Chicago market, and its brand is now as tied to Don and Roma Wade in the mornings and Roe Conn and Richard Roeper in the afternoons and their Chicago-centric view of the world as it is to Rush Limbaugh's syndicated show in middays, if not more so.

That might not show up in a spreadsheet for investors. The Federal Communications Commission, in reviewing the deal, is more likely to note that there is Cumulus and Citadel overlap in markets such as Atlanta, Dallas and San Francisco, and there may be reasons to disallow combining the holdings in Harrisburg, Pa., and Nashville, Tenn.

But, frankly, amid increasing competition from the Internet, satellite pay-radio and other formats, the ability of listeners to identify a station as uniquely their own is not to be taken lightly.

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