Cumulus Media adopted a so-called “poison pill” to refute any attempt at an unsolicited takeover attempt by Renew Group. But thanks to a decision by the Federal Communications Commission, the Singapore-based investment firm will be kept at bay, at least for now. The FCC is putting limits on Renew Group while it reviews an application filed by Cumulus that seeks to allow the investment firm to increase its stake in the radio group.
The Commission in 2020 said Cumulus could be up to as much as 100% foreign owned as part of its bankruptcy reorganization. But it also said that whenever an investor owned more than 5% of the company, it had to get FCC approval. So Cumulus filed a petition in February asking the FCC to allow Renew Group to hold up to 14.99% equity and voting interest in the broadcast group. The request came after a Renew Group buying blitz of Cumulus shares and the revelation to company management that Renew Group planned to double the size of its holdings beyond the roughly 10% now held.
That led Cumulus to adopt a limited-duration shareholder rights plan — or “poison pill” — to prevent any hostile takeover attempt. But while Cumulus may not have wanted a takeover, Renew Group’s investment dollars were still welcome. In late February, Cumulus went to the FCC asking it to allow Renew Group to upsize its stake, saying it would “serve the public interest” and “incentivize foreign investment and advance US trade policy by encouraging reciprocal investment opportunities for US companies in foreign markets .”
The FCC on Friday (April 26) agreed to give Cumulus what amounts to an interim approval. It says Renew Group can maintain its current stake as the agency reviews the request that it be allowed to increase its stake goes through the regular approval process. Audio Division Chief Arthur Shuldiner points out that it is the result of an “independent investment decision” and that Cumulus was not even aware that Renew Group had been buying up shares until it made a standard disclosure filing with the Securities and Exchange Commission, so there was no reason to punish Cumulus without first seeking permission to go beyond the 5% cap agreed to in 2020.
But there will be several restrictions on Renew Group, including some that Cumulus will likely welcome since they further limit any threat of a hostile takeover attempt. Shuldiner says the conditions being put on Renew Group are “designed to insulate, to the extent possible” the stockholder’s moves.
Among the requirements ordered by the FCC: Cumulus must suspend all voting rights for any Renew Group-held shares that go beyond the 5% limit until and unless the FCC releases a declaratory ruling granting approval for Renew Group to own a larger equity stake. Renew Group will also not be able to nominate anyone for the Cumulus board or serve on the board itself. It will also not be allowed to attend any Cumulus board meetings or receive non-public materials distributed to board members.
Renew Group will also be prohibited from having any communications with managers about the day-to-day operations of the radio station, and it won’t have a say in decisions related to buying or selling assets.
The investment firm will also be barred from receiving any dividends paid until after the Commission issues a declaratory ruling. If Cumulus does pay out a dividend, the company will need to put the money in escrow. Cumulus will also need to certify that it’s in compliance with those conditions.
Despite all the hoops, Cumulus earlier said that it doesn’t believe Renew Group’s investment poses any threat to US national security, law enforcement, or foreign or trade policy. It also points out that Renew Group CEO Ravinder Sajwan is a US citizen.
But by keeping the firm at a 14.99% cap, it keeps Renew Group below the 15% level adopted in the plan to prevent any hostile takeover attempt. When the board made that decision, it came after Cumulus learned how much stock Renew Group had accumulated, and what its future plans involved. The FCC process means such a surprise won’t be repeated.
