The nuptials are set for June 12th to unite ABC Radio with Citadel Broadcasting, joining the 22 big market ABC stations and ABC Radio Networks with Farid Suleman's Citadel Broadcasting to create the third largest US radio group in terms of billings, behind Clear Channel and CBS Radio. The parent of the bride, Disney, will not exit radio completely with this 2.7 billion bucks divestiture, since ESPN Radio and its O&Os and Radio Disney and its O&Os will remain with the company.
Disney has set June 6th as the record date for shareholders to receive shares of ABC Radio Holdings, which will be spun off to merge with Citadel, with closing expected on June 12th. Meanwhile, Citadel's board of directors declared a special dividend of 2.46 per share, a whopping 30% of Friday's closing stock price, to be paid to shareholders of record on the second trading day prior to closing. With closing expected to be Tuesday, June 12th, the likely record date will be Friday, June 8th.
To comply with FCC ownership limits, Citadel will be divesting 11 stations. Those are going into the Last Bastion Station Trust, with veteran broker Elliot Evers as trustee (3/7/06 RBR #46), to be sold off.
RBR observation: Why the huge dividend to Citadel shareholders? It's not because Farid Suleman has more money lying around than he knows what to do with. For this deal to be tax-free to Disney shareholders, they must end up owning more than 50% of the merged company. To balance the relative values of Citadel and the ABC Radio holding company, Citadel must take on more debt and make the payout to shareholders so that its total equity is slightly below that of the ABC Radio entity. Citadel's share price should drop in relation to the payout, but we and everyone else will be watching to see if that price moves back up quickly as Citadel becomes a much bigger player in the radio business, particularly in larger markets, and continues to pay a hefty regular dividend.
