Originally created 04/29/00

Rumors fly over Cumulus



Cumulus Media Inc., a Milwaukee, Wis.-based broadcast company that has aggressively taken over radio stations in Augusta and other midsize cities, might be vulnerable to an acquisition itself.

The heavily leveraged company recently lost two executives. Its stock price hit a 52-week low Tuesday, trading at $8.37 -- about 85 percent off its $55.44 high in December. The new low came one day after accounting firm PricewaterhouseCoopers LLP resigned as the outside auditor for Cumulus. The company also has been accused of fraud in several lawsuits.

Analysts have speculated in published reports that the 300-plus station company will not be able to complete its planned acquisitions and the company might be looking for a buyer.

Cumulus Chairman Richard Weening said the company is not for sale.

"Absolutely not!" he wrote in an e-mail response to a written inquiry from The Augusta Chronicle. "We have an excellent company! We have no plans to sell."

He did not, however, return calls requesting a telephone interview or respond to written questions about pending lawsuits, the recent departure of company President Bill Bungeroth and Chief Financial Officer Richard Bonick and the future of several planned acquisitions.

An aggressive firm

In the past year, Cumulus has increased the number of stations it owns by more than 60 percent nationally. It is now one of the largest radio broadcasters in the United States. Its growth strategy is focused on midsize radio markets, such as Augusta.

The company also has aggressively increased market share.

In two years, it has taken control of nine stations locally -- about a third of the radio stations -- and has captured more than half the listeners in this market, the company says.

It has shaken things up in the local market.

Cumulus' local general manager, Gary Pizzati, who did not immediately return telephone calls, has made no apology for his aggressive style. He has dumped longstanding programs, changed formats, fired veteran broadcasters and hired competitor's employees.

The defendant

Cumulus has been named as a defendant in at least six lawsuits filed in the U.S. District Court for the Eastern District of Wisconsin, according to the company's annual report and statements from firms filing the suits. The lawsuits were filed as class-action cases on behalf of Cumulus shareholders.

The plaintiffs allege, among other things, that Cumulus issued false and misleading statements and failed to disclose important facts. As a result, they charge, the stock price was inflated.

Philadelphia-based law firm Berger & Montague accuses the broadcaster of "improperly recording revenues on contract sales" to "create the expectation in the market that Cumulus was an increasingly profitable company."

Shareholders are seeking unspecified damages.

According to lawyers, the cases stem from a March 15 announcement in which Cumulus reported its outside auditors, PricewaterhouseCoopers, refused to sign off on the company's fourth-quarter earnings, and the radio company's chief financial officer resigned.

On March 16, the company announced it would restate its financial results for the first three quarters of fiscal 1999.

On March 17, the price fell 35 percent and never rebounded.

Deregulation

The Telecommunications Act of 1996 has transformed industry players from mostly private and mom-and-pop businesses into multimillion-dollar, publicly held enterprises.

"Five years ago there weren't any that were public," Beasley Broadcast Group Inc. local General Manager Kent Dunn said. "This is a whole new place."

In February, Naples, Fla.-based Beasley held an initial public offering. It owns and operates 36 radio stations, including four in the Augusta area. In March, Washington-based Radio One Inc. agreed to buy five Augusta radio stations owned by Davis Broadcasting for $24 million. The deal is subject to federal regulatory approval.

Now, the only major privately-held player in the area is GHB Broadcasting.

Before the speculation erupted, Cumulus had announced plans to buy more stations: 35 from Connoisseur Communications, 10 from Clear Channel Communications, eight from McDonald Media Group and one from Pacific Coast Communications.

Some analysts wonder how the company will pay for the acquisitions.

Cumulus stock closed at $13.13 Friday, down about 6 cents.

Reach Frank Witsil at 823-3352.