- Associated Press - Thursday, February 17, 2011

Citadel Broadcasting Corp. is negotiating a $1.8 billion sale of the company to previously spurned suitor Cumulus Media Inc. in a deal that would join two of the nation’s largest radio station owners.

The renewed negotiations announced Thursday come nearly three months after Citadel outraged some of its shareholders by rejecting a $1.5 billion bid by Cumulus.

Cumulus later raised its cash-and-stock bid to $37 per share, up from its previous offer of $31 per share. The value of the sweetened bid is worth $2.5 billion, if assumed debt is included. Cumulus’s offer represents a bet that the radio advertising market will continue rebounding after an extended slump that drove Citadel into bankruptcy protection in 2009.

Citadel shares surged $5.45, or 18 percent, to close at $35.45 on the over-the-counter market. Cumulus shares gained 47 cents, or nearly 11 percent, to close at $4.78.

Like other media, radio broadcasters were hard hit in 2008 and 2009 as the Great Recession curtailed the ad spending that generates most of their revenue. An advertising shift to the Internet also siphoned money away from radio stations.

But the outlook has been improving modestly as the recovering economy has encouraged advertisers to increase their marketing budgets. After shedding more than $1 billion in debt as part of its reorganization plan, Citadel has been making money since emerging from bankruptcy protection last June.

Cumulus‘ latest bid would include up to $1.5 billion in cash and the remaining amount in stock, according to the terms released by Citadel. But the debt needed to complete the latest bid could prove to be a hurdle to getting a deal done. Cumulus, based in Atlanta, had just about $13 million in cash as of Sept. 30, according to its last quarterly balance sheet. The company has lined up $500 million in financing from Crestview Partners. The remainder would be raised by a group led by UBS Investment Bank.

The deal would also need to be approved by federal regulators.

If the deal for the third-largest U.S. radio broadcaster is completed, Cumulus will remain No. 2 in the U.S. behind Clear Channel Communications Inc. Cumulus currently owns 347 radio stations in 67 major media markets. Las Vegas-based Citadel owns 225 stations scattered in 27 states.

Clear Channel, based in San Antonio, Texas, owns more than 800 stations.

Cumulus earned $22 million on revenue of $194 million during the first nine months of last year, reversing a loss of $133 million on revenue of $186 million in the previous year. The 2009 loss stemmed from charges that were absorbed to reflect the eroding value of Cumulus’s radio stations as advertising sagged. Cumulus is scheduled to report its fourth-quarter results Feb. 28.

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