When: Today, Thursday, February 17, 2011
Where: CNBC's "The Strategy Session" AT 12PM ET
Following is the unofficial transcript of breaking news from CNBC's David Faber. All references must be sourced to CNBC.
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DAVID FABER: AND WELCOME TO THE SHOW IM DAVID FABER. WANT TO START THIS BROADCAST WITH SOME BREAKING NEWS FROM ME INVOLVING POTENTIAL CONSOLIDATION IN THE RADIO INDUSTRY. I CAN TELL YOU THAT CITADEL BROADCASTING ONE OF THE LARGER RADIO COMPANIES OUT THERE 224 STATIONS OR SO FORMERLY BANKRUPT REORGANIZED AND NOW OF COURSE MUCH OF THAT DEBT HELD BY HEDGE FUNDS AND THE LIKE IS IN EXCLUSIVE NEGOTIATIONS TO SELL ITSELF TO CUMULUS BROADCASTING IN A $37 DOLLAR A SHARE DEAL. NOW $30 OF THE CONSIDERATION WOULD BE IN CASH AND $7 IN CUMULUS STOCK. AGAIN THE 2 COMPANIES ARE IN WHAT ARE BEING TERMED TO ME BY PEOPLE CLOSE TO THE SITUATION AS EXCLUSIVE NEGOTIATIONS AIMED OF COURSE AT GETTING TO A DEAL. IT WAS MID DECEMBER WHEN CUMULUS LED BY ITS CEO LOU DICKIE MADE AN OFFER OF AROUND $31 A SHARE FOR CITADEL WHICH WAS REJECTED BY THE COMPANY. AT THAT TIME A BLLION DOLLARS OF THAT DEAL OF THAT OFFER I SHOULD SAY WOULD HAVE BEEN A CASH OFFER. THE CASH COMPONENT OBVIOUSLY IS NOW A LARGER ONE. IT APPEARS SINCE THEN CITADEL HAS BEEN IF YOU WILL IN AUCTION MODE. IN FACT IM TOLD THAT INTERCOM ANOTHER RADIO COMPANY WAS A CLOSE SECOND IN TERMS OF PRICE HERE IN TERMS OF THE BIDDING. THE EXCLUSIVE NEGOTIATIONS ARE EXPECTED TO GO ON PERHAPS FOR A SHORT AMOUNT OF TIME BECAUSE IN A DEAL LIKE THIS GIVEN CUMULUS' MARKET CAP EXTROARDINARILY LOW YOURE TALKING ABOUT A HIGHER LEVEL DEAL THATS GOING TO REQUIRE A LOT OF DEBT FINANCING TO FUND THAT CASH PORTION OF THE OVERALL DEAL. AND WELL THE QUESTION ALWAYS IS CAN YOU GET TO THAT LEVEL OF FINANCING SO THAT WILL BE A KEY QUESTION IN TERMS OF OF THE CUMULUS SIDE. IT WOULD PROBABLY BE SOMETHING THAT WOULD BE A FOCUS OF THESE NEGOTIATIONS AS THEY GO ON. BUT ULTIMATELY CITADEL A COMPANY OF COURSE ENGAGED IN THE BRUTAL INDUSTRY OF RADIO WHICH SAW A NUMBER OF BANKRUPTCIES ITSELF WENT BANRUPT THEN RE-EMERGED AND NOW APPEARS TO BE VERY CLOSE TO SELLING ITSELF TO CUMULUS MEDIA AN AGRESSIVE COMPANY THAT BY THE WAY ITSELF TRIED TO GO PRIVATE A FEW YEARS AGO DURING THE HEIGHT OF THE BOOM AND ULTIMATELY WAS UNABLE TO. TOGETHER THE COMPANIES OF COURSE WOULD BE ONE OF THE LARGEST IF NOT THE SINGLE LARGEST IM NOT SURE IF THEY WOULD BE LARGER THAN CLEAR CHANNEL AT THIS POINT RADIO COMPANIES IN THE COUNTRY. BUT AGAIN YOU GOT TO WONDER IN TERMS OF LEVERAGE AND WHERE THAT ENDS UP $37 A SHARE THOUGH IS WHERE THEY ARE NEGOTIATING FROM RIGHT NOW $30 A SHARE IN CASH AND AGAIN $7 IN CUMULUS STOCK. IM ALSO HEARING THAT A PRIVATE EQUITY FIRM CRESTVIEW CONCIEVABLY WOULD BE CONTRIBUTING AS MUCH AS 500 MILLION TO THE CASH ON CUMULUS' PART TO HELP FUND THE DEAL.
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