One analyst tells Radio Ink Cumulus’ latest 8K filing is “a poison pill designed to prevent a takeover of the company.” This will no doubt fuel more speculation as to what Lew Dickey may be up to after he launched a new company called Modern Media Acquisition Corp which was specifically created to effect a merger. In the 8K, Cumulus specifically points out that the new “Rights Agreement” is not being adopted in response to any specific action or proposal. So why do it then? Here is some of the language from the 8K…
On June 5 the Cumulus Board declared a dividend of one preferred share purchase right, for each share of Class A Common Stock, par value $0.01 per share, of the Company outstanding on June 15, 2017 to the stockholders of record on that date. In connection with the distribution of the Rights, the Company entered into a Rights Agreement dated as of June 5, 2017, between the Company and Computershare Trust Company, N.A., as Rights Agent. Each Right entitles the registered holder to purchase from the Company one one-thousandth of a share of Series R Preferred Stock, par value $0.01 per share, of the Company at a price of $2.50 per one one-thousandth of a Preferred Share represented by a Right, subject to adjustment.
Former CEO Lew Dickey was pushed out of the company nearly two years ago. New CEO Mary Berner has been attempting to turn the company around, though it is saddled with about $2 billion in debt. She has consistently stated that the debt is a problem that needs to be addressed and the company was looking at all options to address that debt. The Cumulus stock price has been wallowing below $1 for quite some time now.
Cumulus says, “The Rights Agreement is designed to protect the Company’s substantial net operating loss carryforwards in order to preserve the Company’s long-term value and maintain the integrity of the Company’s ongoing restructuring process.” Cumulus also says the Rights Agreement is intended to promote the fair and equal treatment of all stockholders of the Company and to ensure that the Board remains in the best position to discharge its fiduciary duties. The Rights Agreement is not intended to prevent any action that the Board determines to be in the best interests of the Company and is not being adopted in response to any specific action or proposal.
You can read the entire SEC filing HERE.