Cumulus Media Inc. Adopts Limited-Duration Shareholder Rights Plan

Rhea-AI Summary

Cumulus Media Inc. (NASDAQ: CMLS) adopts a limited-duration shareholder rights plan to protect shareholders' interests from Renew Group Private Ltd.'s stock accumulation. The plan aims to safeguard shareholders from potential takeovers and ensure fair treatment in acquisitions.

Insights

Financial Analyst

The adoption of a shareholder rights plan, commonly known as a 'poison pill', is a significant defensive strategy against potential hostile takeovers. In the case of Cumulus Media, the trigger for the rights plan is set at a 15% ownership threshold. This move is typically designed to dilute the potential acquirer's stake, making a takeover more expensive and complex.

From a financial perspective, this can be a double-edged sword. On one hand, it may protect the company's autonomy and prevent an acquisition that undervalues the company. On the other hand, it can also be perceived as a barrier to potential premium offers, possibly affecting the stock price negatively due to investor concerns about limited M&A prospects.

For current investors, the rights plan may provide assurance that their interests are being safeguarded. However, it may also signal that the board anticipates aggressive takeover attempts, which could introduce volatility in the stock's performance. The plan's limited duration suggests a temporary protective measure, which implies that the board is open to future negotiations under more favorable terms.

Legal Expert

Legally, the adoption of a rights plan is a well-established mechanism for boards to control the pace and nature of takeover bids. It compels any potential acquirer to negotiate directly with the board, rather than accumulating a controlling stake on the open market. The legal framework around Schedule 13D filings indicates that a shareholder has crossed a threshold of intent regarding control of the company, which can trigger defensive measures like the one Cumulus Media has adopted.

The rights plan does not preclude the board from considering fair offers, preserving its fiduciary duty to consider the best interests of all shareholders. However, any potential acquirer now faces the challenge of either convincing the board and shareholders of the merits of their bid or acquiring a stake large enough to trigger the rights and face significant dilution.

Market Research Analyst

The strategic move by Cumulus Media to implement a rights plan in response to Renew Group Private Ltd.'s significant share accumulation is a clear indicator of the competitive dynamics within the media industry. As the Group also holds stakes in competitors, this raises concerns about the intentions behind their share accumulation.

Market trends show that media companies are often targets for acquisitions due to their valuable content and market positioning. Cumulus Media's decision to adopt a rights plan could be interpreted as a signal of its undervalued market position or as a protective measure against industry consolidation that may not align with the company's strategic vision.

Investors should monitor the company's performance and market response to gauge the impact of this rights plan on Cumulus Media's valuation. The plan's effectiveness in deterring unwanted acquisition attempts will likely be reflected in the company's stock price stability and investor confidence.

ATLANTA, Feb. 22, 2024 (GLOBE NEWSWIRE) -- Cumulus Media Inc. (NASDAQ: CMLS) (“Cumulus Media” or the “Company”) today announced that its Board of Directors (the “Board”) has adopted a limited-duration shareholder rights plan (“Rights Plan”) to protect the best interests of all Cumulus Media shareholders. The Rights Plan is effective immediately and will expire on February 20, 2025. The Board may consider an earlier termination of the Rights Plan if circumstances warrant.

The limited-duration Rights Plan was adopted in response to the significant accumulation of Cumulus Media stock by Renew Group Private Ltd., an entity based in Singapore (together with its affiliates, the “Group”). In adopting the plan, the Cumulus Board considered, in consultation with legal and financial advisors, among other things, that:

• The Group initially disclosed that it had acquired approximately 5.15% of the Company’s outstanding Class A shares in a Schedule 13G filing on July 28, 2023;
• On January 24, 2024, the Group converted its filing to a Schedule 13D and reported beneficial ownership of approximately 10.01% of the Company’s outstanding Class A shares;
• In meetings with members of Cumulus Media leadership in the weeks following the Group’s Schedule 13D filing, the Group stated its intent to acquire 20% of the Company; and
• The Group has investments in other media companies, including a sizeable holding in a direct competitor of Cumulus Media.

“Given the facts, the Cumulus Board firmly believes it is necessary to adopt a limited-duration rights plan to protect the interests of all Cumulus shareholders. The Rights Plan is intended to enable the Company’s shareholders to realize the long-term value of their investment, ensure that all shareholders receive fair and equal treatment in the event of any proposed takeover of the Company, and guard against tactics to gain control of the Company without paying all shareholders an appropriate premium for that control,” said Andrew Hobson, Chairman of the Board. He continued, “Cumulus Media’s leadership maintains open dialogue with its investors, including the Group, and intends to continue that practice.”

The Rights Plan applies equally to all current and future shareholders and is not intended to deter offers or preclude the Board from considering offers that are fair and otherwise in the best interest of the Company’s shareholders. The Rights Plan is similar to plans adopted by other publicly traded companies. Pursuant to the Rights Plan, Cumulus Media is issuing one right (“Right”) for each share of Class A and Class B common stock as of the close of business on March 4, 2024. The Rights will initially trade with Cumulus Media common stock and will generally become exercisable only if any person (or any affiliates, associates or persons acting as a group) acquires 15% or more of the Company’s outstanding Class A common stock (the “Triggering Percentage”), including through ownership of the Company’s Class B common stock. The Rights Plan does not aggregate the ownership of shareholders “acting in concert” unless and until they have formed a group under applicable securities laws. If the rights become exercisable, all holders of Rights (other than any triggering person) will be entitled to acquire shares of Class A common stock or Class B common stock, as applicable, at a 50% discount or the Company may exchange each Right held by such holders for one share of Class A common stock or Class B common stock, as applicable. Under the Rights Plan, any person which currently owns more than the Triggering Percentage may continue to own its shares of common stock but may not acquire any additional shares without triggering the Rights Plan. Except as provided in the Rights Plan, the Board is entitled to redeem the Rights at $0.001 per Right.

Further details about the Rights Plan will be contained in a Form 8-K to be filed by Cumulus Media with the SEC.

About Cumulus Media
Cumulus Media (NASDAQ: CMLS) is an audio-first media company delivering premium content to over a quarter billion people every month — wherever and whenever they want it. Cumulus Media engages listeners with high-quality local programming through 403 owned-and-operated radio stations across 85 markets; delivers nationally-syndicated sports, news, talk, and entertainment programming from iconic brands including the NFL, the NCAA, the Masters, CNN, AP News, the Academy of Country Music Awards, and many other world-class partners across more than 9,800 affiliated stations through Westwood One, the largest audio network in America; and inspires listeners through the Cumulus Podcast Network, its rapidly growing network of original podcasts that are smart, entertaining and thought-provoking. Cumulus Media provides advertisers with personal connections, local impact and national reach through broadcast and on-demand digital, mobile, social, and voice-activated platforms, as well as integrated digital marketing services, powerful influencers, full-service audio solutions, industry-leading research and insights, and live event experiences. Cumulus Media is the only audio media company to provide marketers with local and national advertising performance guarantees. For more information visit www.cumulusmedia.com. 

Forward-Looking Statements
Certain statements in this release may constitute “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. Such statements are statements other than historical fact and relate to our intent, belief or current expectations, including but not limited to, statements related to the benefits of the Rights Plan and the ability of the Rights Plan to maximize shareholder value in the event of a takeover of Cumulus. Any such forward-looking statements are not guarantees of future performance and involve risks, uncertainties and other factors that may cause actual results, performance or achievements to differ from those contained in or implied by the forward-looking statements as a result of various factors. Such factors include, among others, risks and uncertainties related to the implementation of our strategic operating plans, the continued uncertain financial and economic conditions, the rapidly changing and competitive media industry, and the economy in general. We are subject to additional risks and uncertainties described in our quarterly and annual reports filed with the Securities and Exchange Commission from time to time, including in the "Risk Factors," and "Management’s Discussion and Analysis of Financial Condition and Results of Operations" sections contained therein. You should not rely on forward-looking statements since they involve known and unknown risks, uncertainties and other factors that are, in some cases, beyond the Company’s control, and the unexpected occurrence or failure to occur of any such events or matters could cause our actual results, performance, financial condition or achievements to differ materially from those expressed or implied by such forward-looking statements. Cumulus Media assumes no responsibility to update any forward-looking statements, which are based upon expectations as of the date hereof, as a result of new information, future events or otherwise.

Investor Relations
IR@cumulus.com
404-260-6600

FAQ

Why did Cumulus Media adopt a limited-duration shareholder rights plan?

Cumulus Media adopted the plan to protect shareholders' interests from Renew Group Private Ltd.'s stock accumulation and potential takeovers.

When will the Rights Plan expire?

The Rights Plan will expire on February 20, 2025.

What percentage of Cumulus Media's outstanding Class A shares does Renew Group Private Ltd. own?

Renew Group Private Ltd. reported beneficial ownership of approximately 10.01% of the Company's outstanding Class A shares.

What triggers the Rights becoming exercisable under the Rights Plan?

The Rights will become exercisable if any person acquires 15% or more of the Company's outstanding Class A common stock.

How can shareholders acquire shares under the Rights Plan?

Shareholders can acquire shares at a 50% discount or exchange each Right for one share of Class A common stock or Class B common stock, as applicable.