Cumulus shares plunge after buyout falls through

Shares of Cumulus Media Inc. plunged Monday after the radio station owner said its planned buyout had fallen through, although a Wachovia Capital Markets analyst said she was not surprised by the announcement.

Cumulus shares dropped $1.38, or 23.8 percent, to $4.43, after hitting a 52-week low of $4.25 earlier in the session. The stock has fallen from a high of $11.74 in July, after the $11.75-per-share deal was announced. Shares hit a previous low of $4.87 in March.

The investor group, led by Chairman, President and Chief Executive Lewis Dickey and an affiliate of Merrill Lynch Global Private Equity, could not agree on terms to proceed with the deal, which was valued at about $507.7 million, or $1.3 billion including debt.

"Given the state of the credit markets and radio's deteriorating fundamentals, we are not surprised by this announcement and frankly thought it would come sooner," said Wachovia Capital Markets analyst Marci Ryvicker.

Atlanta-based Cumulus said it will receive a termination fee of $15 million and may authorize a new stock repurchase plan. Ryvicker, however, does not expect buybacks to boost the stock. "Given that share repurchase activity has generally not helped the media stocks over the past few years, we do not think that this announcement will lend support to Cumulus."

Last week, Cumulus reported that its first-quarter loss widened, missing Wall Street expectations, as its interest expense increased. Total revenue gained slightly as higher local advertising more than offset a drop in national ad spending.

Ryvicker noted that the company's management said second-quarter revenue is pacing slightly down, but the forecast is still better than industry trends.