Forstmann to Buy Radio Station Owner

Forstmann Little & Co., a leveraged-buyout firm, agreed to buy Citadel Communications Corp., an owner of radio stations in mid-size U.S. markets, for $962 million.

Forstmann will pay $26 in cash for each Citadel share, 49% more than Friday’s closing price. Citadel jumped $7.25 to close at $24.75 on Nasdaq. New York-based Forstmann is paying $962 million and assuming $1 billion in debt, Citadel Chairman Lawrence Wilson said.

Theodore Forstmann, the billionaire who heads Forstmann Little, made his fortune buying and then selling companies, including Gulfstream Aerospace Corp. and General Instrument Corp. The Citadel purchase comes after the stock fell 66% in the last year as advertising sales growth slowed and the Bloomberg Broadcasting & Cable Radio Stock Index dropped 35%.

Las Vegas-based Citadel, the sixth-largest U.S. radio broadcaster, said it will own or operate 143 FM and 66 AM stations in 44 markets after all pending transactions are completed.

Forstmann will invest $1.5 billion of its own money, and affiliates of J.P. Morgan Chase & Co. will provide $500 million in bank financing.

A leveraged-buyout firm, which borrows money to make acquisitions and uses the assets as collateral, repays debt from the company’s profit.

Forstmann Little, which has $4 billion available for more buyouts, said in a statement that it has made 28 acquisitions since 1978. Officials from the company weren’t immediately available to comment.