Trio in $1.2bn radio deal

The Blackstone Group, Bain Capital and Thomas H. Lee Partners have teamed up with Cumulus Media to acquire Susquehanna Radio in $1.2bn deal.

As expected, the radio broadcasting business of Susquehanna Pfaltzgraff was sold to a consortium of private equity firms. Bain Capital, The Blackstone Group and Thomas H. Lee Partners teamed up with strategic broadcaster Cumulus Media to acquire Susquehanna Radio in a roughly $1.2 billion (€1 billion) acquisition. The purchase, expected to close in the first half of next year, was made through a private holding company, Cumulus Media Partners.

Bain, Blackstone and Thomas H. Lee are the latest entrants into the radio space.

The transaction represents an interesting play for Bain Capital and Thomas H. Lee Partners, which are also significant shareholders in Warner Music Group. Warner, this spring, was issued with a subpoena by New York attorney general Eliot Spitzer, inquiring about the relationships between the music companies and radio stations, specifically targeting promoters that serve as a go-between for the two sides. Bain and Thomas H. Lee were part of a group that had acquired Warner Music in a $2.6 billion deal in 2004, and ultimately took the company public earlier this year. 

The acquisition of Susquehanna gives the buyers control of the No. 11 radio broadcaster in the US. The company controls over 30 radio stations primarily in the 40 largest markets, including San Francisco, Dallas, Houston and Atlanta, among others, according to its Web site.

Based on the terms of the agreement, Cumulus will be spearheading the operations, and with incentives could end up owning around 40 percent of the business. Initially, though, Cumulus will own roughly 25 percent of the holding company, and as certain performance targets are met, its stake will grow incrementally. Cumulus will also be paid a quarterly management fee.

The press release did not mention how much equity the buyers would put into the deal, although it indicated Deutsche Bank, Merrill Lynch, Goldman Sachs and UBS would provide debt financing for the purchase.

Deutsche Bank Securities served as financial advisor to Cumulus Media Inc., while the holding company was advised by Deutsche Bank and Goldman Sachs. Jones Day served as legal counsel for Cumulus and Simpson Thacher & Bartlett acted as counsel to the private equity investors. UBS Investment Bank ran the auction for Susquehanna Pfaltzgraff.

The deal represents a step back into terrestrial radio for Blackstone. Last year, the firm teamed up with Providence Equity Partners to acquire a 40 percent stake in Freedom Communications, and before that had been a significant investor in US Radio. The firm has also invested in satellite radio provider Sirius Satellite Radio.

A number of other private equity groups have also jumped into the radio space in recent years, including Arlington Capital, Nautic Partners and Veronis Suhler Stevenson. Additionally, Vestar Capital recently hired Kenneth O’Keefe, a veteran of Clear Channel Communications, possibly a signalling a desire by Vestar to pursue radio deals.