Citadel Communications Corporation
Citadel Communications Corporation
Incorporated: 1991 as Citadel Broadcasting Company
Sales: $196.2 million (1999)
Stock Exchanges: NASDAQ
Ticker Symbol: CITC
NAIC: 513112 Radio Stations
Citadel Communications Corporation ranks among the top six owners of U.S. radio stations in terms of both revenue and number of stations owned. The company specializes in mid-size markets and has an ownership presence in nearly every region of the country. Following the passage of the Telecommunications Act of 1996, which raised ownership limits in single markets and eliminated the national ownership limit on radio stations, Citadel spent more than $1 billion to acquire more than 170 radio stations from 1997 through the end of 1999. When all of the company’s pending acquisitions are completed as of mid-2000, Citadel will own more than 200 radio stations in mid-size markets throughout the United States.
The predecessor company to Citadel Communications Corporation was a limited partnership called Citadel Associates Limited Partnership (CALP). CALP was founded by Lawrence Ray Wilson in late 1984 with the purchase of two radio stations in Tucson, Arizona, for $5 million. Two-and-a-half years later Wilson sold the same stations for $10.1 million. During the 1970s Wilson was executive vice-president and general counsel for Combined Communications Corporation, which owned a television station in Little Rock, Arkansas. Before getting into radio, he was a CPA and practicing lawyer. In 1990 Wilson cofounded and was a general partner in Citadel Associates Montana Limited Partnership (CAMLP), which was formed to own and operate radio stations in Montana that were formerly owned by CALP. The next year Citadel Broadcasting Company was incorporated as a Nevada corporation, and in 1992 Citadel acquired all of the radio stations then owned or operated by CALP and CAMLP.
In 1991 Citadel obtained the first “local marketing agreement” (LMA) from the Federal Communications Commission (FCC) in Colorado Springs. Under an LMA, Citadel would buy time from a radio station and resell it, giving Citadel control of the programming but not ownership of the station or its license. LMA’s became a popular way for companies to control radio stations while still meeting federal regulations governing station ownership.
Concentrating on Radio Duopolies: 1992-96
Between 1992 and 1996 Citadel concentrated on acquiring radio duopolies, or AM-FM combinations, in mid-size markets. In 1992 Citadel owned eight radio stations. Wilson bought out his limited partners that year and Citadel also acquired eight radio stations from Price Broadcasting Co. for $12.5 million, including AM-FM combinations in Spokane, Washington; Modesto, California; Redding, California; an AM station in Reno, Nevada; and an FM station in Boise, Idaho. The acquisition effectively doubled the size of the company.
Citadel Communications Corporation was formed as the parent company to Citadel Broadcasting Company in 1993. During 1993 Citadel acquired one AM and six FM stations, giving it a total of 26 stations. Sales for 1993 totaled $21 million. In 1994 the company entered the Albuquerque, New Mexico, market with the acquisition of two FM and two AM radio stations. Citadel subsequently expanded its presence in Albuquerque in 1996 with the acquisition of another AM and three FM stations. The company also acquired FM stations in Modesto, California, and Colorado Springs in 1996.
Increasing Pace of Acquisitions: 1996-97
The federal Telecommunications Act of 1996 changed the ownership rules for radio stations, among other things, allowing companies to acquire and own more stations in a given market. It also removed the national limit on how many stations a company could own. Up to this point Citadel’s acquisitions had been concentrated in the western United States. Around this time Citadel began to face its first serious competition in mid-size markets when Capstar Broadcasting Partners was formed in May 1996.
Citadel spent about $70 million acquiring stations in mid-size markets in 1996. At the start of 1997 the company owned 81 radio stations. In April 1997 it made its biggest acquisition to date when it purchased 25 stations owned by Tele-Media Communications Corp. for $117 million. The stations were located in Pennsylvania, Rhode Island, Illinois, and California. It was the first time Citadel had acquired stations outside of the West.
Later in the year Citadel attempted to sell four of the stations—all located in Centre County, Pennsylvania—to Talleyrand Broadcasting Inc. However, the sale was blocked by the U.S. Department of Justice in 1998 because it would have given the buyer in excess of 40 percent of the total radio advertising revenue in that market. At this time Wilson was operating out of his ranch in Bigfork, Montana, and Citadel had offices in Tempe, Arizona.
Other 1997 acquisitions included several radio stations in Arkansas and the Arkansas Radio Network for about $25 million from Snider Corporation and Cornerstone Broadcasting. After this deal was completed, Citadel would own 94 radio stations. During 1997 the company had purchased a total of 61 radio stations for about $230 million.
Aggressive Acquisition Strategy: 1998-2000
In 1998 Citadel completed an initial public offering (IPO) on the NASDAQ and raised $106.9 million for debt reduction and future acquisitions. The company’s estimated annual sales of $117 million ranked 13th among radio station owners. Citadel noted, with its IPO filing, that it expected to continue to lose money. It lost $5.3 million in 1997, which it attributed to one-time charges related to acquisitions and interest payments on its debt, and expected even larger losses in the future. Principal owners of the company were Wilson, with 19.1 percent, and ABRY Broadcast Partners, with 37.2 percent.
Later in 1998 Citadel acquired nine radio stations in Baton Rouge and Lafayette, Louisiana, from Citywide Communications Inc. for $34 million. In November it acquired its fifth station in the Harrisburg, Pennsylvania, market for $4.5 million from Zeve Broadcasting Co.
Also in November Citadel acquired 16 radio stations from Wicks Broadcast Group for $77 million in cash, including eight stations in Charleston, South Carolina; five in Binghamton, New York; and three in central Indiana. These were the first stations Citadel would own in those markets. In Charleston and Binghamton, the station clusters would exceed the federal limit of 40 percent of the market’s radio advertising revenue. Citadel had acquired some 35 stations since its IPO in July. Before the month of November was done, Citadel had obtained antitrust clearances from the Federal Trade Commission (FTC) to purchase six radio stations in Saginaw, Michigan, for $35 million from 62nd Street Holdings LLC.
For 1998 Citadel lost $3.8 million compared to a loss of $5.3 million in 1997. Net revenue was a record $135.4 million, up about 50 percent from 1997. Broadcast cash flow rose 70 percent to $41.9 million.
At the beginning of 1999 Citadel announced it would move its corporate offices from Tempe to Las Vegas. The company agreed to sell 25 radio stations in six small markets to Chicago’s Marathon Media LP for $26 million in cash. The stations were located in small markets not in the top 100, including Johnstown, Pennsylvania; Eugene, Oregon; Medford, Oregon; Tri-Cities, Washington; State College, Pennsylvania; and Billings, Montana. In another transaction, Citadel and Capstar agreed to swap radio stations in Spokane, Washington, and Colorado Springs to avoid federal ownership restrictions.
Citadel had launched an Internet service provider (ISP) called eFortress in 1997. By March 1999 eFortress had nearly 25,000 customers. After acquiring 1,500 dial-up customers from one Rhode Island company in early 1997, Citadel gained more customers that year when it acquired two Rhode Island radio stations from Philip Urso. Urso also owned an ISP called Edgenet, which he would advertise on his two radio stations. Under Citadel, Edgenet became eFortress, with Urso as president of the division. In January 1998 eFortress began expanding to other cities. Following Citadel’s IPO, the company acquired six ISPs. Its key markets for Internet service were Rhode Island, Salt Lake City, Colorado Springs, and Albuquerque. In March 1999 Citadel acquired the assets and customer base of another Rhode Island ISP called Brainiac Services, giving eFortress just over 10,000 customers in Rhode Island. However, by the end of 1999 Citadel had decided to sell eFortress and its ISP operations, and expected to complete the divestiture by mid-2000.
Our mission is to build station clusters that provide a leading market share, cost efficiencies and the critical mass to better compete with other forms of media. Operating prominent station groups allows us to attract and retain talented local management teams, on-air personalities and sales personnel, which we believe are essential to success.
During 1999 Citadel announced or completed the acquisition of 78 radio stations for a total of $537 million. In August the company purchased its sixth station in Baton Rouge for $9.5 million from KTBT Radio Broadcasting Co. In October it agreed to acquire 36 radio stations from Broadcasting Partners Holdings for $190 million. The deal, which required FCC approval, would give Citadel 161 stations in 34 markets. The 36 stations included five in Buffalo, New York; four in Syracuse, New York; three in Atlantic City, New Jersey; three in Tyler-Longview, Texas; and four in Monroe, Louisiana.
In November Citadel purchased four stations in Lafayette, Louisiana, the 98th ranked market in the United States, from Radio Broadcasting Co. for $8.5 million. The acquisition would give Citadel an eight-station cluster in that market. During the month Citadel also acquired another station in Murray, Utah, serving Salt Lake City, for $104,202.
In December Citadel announced it would acquire nine radio stations in three Michigan markets from Liggett Broadcasting for $120.5 million. The purchase gave Citadel a six-station cluster in Lansing, Michigan, and a strong station in Flint. It also added two stations in Saginaw, Michigan, giving Citadel a total of eight stations there that added up to more than 70 percent of the radio market revenue—well in excess of the federal limit of 40 percent. As a result, Citadel would have to divest some stations in that market. It also acquired two stations in Worcester, Massachusetts, for $24.5 million from Montachusett Broadcasting. Upon completion of these deals, Citadel would own 177 stations, 54 AMs and 123 FMs.
At the end of 1999 Citadel had grown through an aggressive acquisitions program to become the sixth largest radio group based on revenue and the fourth largest in terms of stations owned. Toward the end of the year it filed a $1 billion shelf offering with the Securities and Exchange Commission (SEC) that would allow it to sell stock up to that amount at any time. The company also arranged a $400 million credit facility to help pay for pending acquisitions worth about $250 million. It was clear that Citadel planned to continue acquiring radio stations.
Continuing Losses, Acquisitions: 2000
In January 2000 Citadel announced it would acquire Bloomington Broadcasting Co. of Chattanooga, Tennessee, which owned 20 radio stations, for $176 million in cash. Included in the purchase were four stations in Chattanooga; four in Grand Rapids, Michigan; four in Columbia, South Carolina; five in Johnson City/Kingsport/Bristol, Tennessee; and three in Bloomington, Indiana. All of the cities were new markets for Citadel.
In May Citadel expanded its presence in the South by purchasing 11 radio stations and one local marketing agreement from Dick Broadcasting Co. of Greensboro, North Carolina, for $300 million. The acquisition consisted of five stations in Birmingham, Alabama; two serving Nashville, Tennessee; four serving Knoxville, Tennessee; and one LMA in Knoxville. With this deal Citadel would own or operate more than 200 radio stations.
For 1999 Citadel reported gross broadcasting revenues of $196.2 million, its highest ever. However, the company’s net loss increased from $3.9 million in 1998 to $8.9 million in 1999. Citadel had assumed a large amount of debt in making its acquisitions over the past three years, and its interest expense had exceeded its operating income in all three years. Concerns about the company’s ability to turn a profit affected its stock price, which in mid-2000 was near its 52-week low.
AMFM Inc.; Beasley Broadcast Group Inc.; Big City Radio Inc.; Cox Radio Inc.; Cumulus Media Inc.; Entercom Communications Corp.; Infinity Broadcasting Corp.; Radio One Inc.; Regent Communications Inc.; Saga Communications Inc.
- Citadel Associates Limited Partnership is formed by Lawrence R. Wilson and others to acquire two radio stations in Tucson, Arizona.
- Citadel Associates Montana Limited Partnership is formed to own and operate radio stations in Montana.
- Citadel Broadcasting Company is incorporated.
- Company acquires all of the radio stations owned by its predecessor limited partnerships.
- Citadel Communications Corporation is formed as the parent company of Citadel Broadcasting Company.
- The Telecommunications Act of 1996 permits radio broadcasting companies to own from five to eight stations in a market and removes the limit on national ownership.
- Citadel acquires 61 radio stations for about $230 million.
- Citadel completes its initial public offering.
- Citadel announces or completes the acquisition of 78 radio stations for about $537 million.
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—David P. Bianco