A Little Off The Top

[Element9]

Citadel Cuts Senior Staff.It appears cost-cutting is the driver of the departure of two executives. Exiting are Mitch Dolan, who's been president of Citadel's major market radio station group that includes 22 stations across nine markets, and Los Angeles market president John Davison.

Don't know these fellows, but the suspicion is they were making a bit more than 7.50 an hour.

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And here's a surprise:

Citadel Recasts Its Ranks. CEO Farid Suleman has publicly said he’s not been happy with how the acquisition of ABC Radio has been going as the big markets have underperformed their medium and small markets. Suleman said they want to give people time to perform. But the clock appears to be running out as more ABC veterans exit.

Poor Farid. "Not happy."

You want "not happy" Mr. CEO? Ask the legion of sales people, air talent, traffic directors, news men and women and managers at the Citadel small and medium market stations that you've tossed under the bus since you and bazillionaire Ted Forstmann concocted the plan to "buy" (Reverse Morris Trust) the ABC major market radio stations.

CDL closed yesterday at 17 cents a share. Your chance to buy in at the market bottom. A year ago CDL traded around $1.10. two years ago it was gliding along at $10.16 a share. Those boys sure have done good work.

Anybody wonder how the ABC-Citadel deal was put together? Smoke and mirrors? Rubber bands and Wrigley's spearmint? Even in a good economy, this deal would have been challenged. But it's not just the lousy economy, which certainly didn't help matters.

The ABC-Citadel deal was stretched thin from the get-go and required a lot of "open gates" in order to cross the bridge to prosperity. Unfortunately, not only were the gates closed, the bridge collapsed. Forstmann's no dummy, he's Ivy League educated. Truth be told, the book on Farid says he can roll numbers with the best of them. But sometimes the smartest men in the room do amazingly stupid things. Worse, they begin to believe they're the smartest men in the room and become crazy arrogant.

I've known small businessmen who went into deals, such as buying a second location for their office goods store. They asked tough questions like, "What happens if things go bad? What if Office Max moves in down the street? What's the worst case scenario? How will that affect us? Who are our biggest customers? What happens if they go under?" Did Ted and Farid stay awake at night thinking about these things?

Guess the party's over for Farid. Yet something tells me he won't won't lose his gated community home in Connecticut, his house in the Hamptons or his collection of sports cars. Nor will he get caught holding the tax bag. He has a platinum-silk parachute. Just hope the moths haven't been nibbling on it.

 

[RomeToupee]

Well said!
As they begin to remove layers of management,one wonders about the status of a certain Citadel "regional" exec with the initials of KL

 

[SirRoxalot]

I think that this is an indication of how desperate the situation is at Citadel.

Judy Ellis has been in charge of the former Citadel properties, and has been whacking away at the small and medium market properties that have been performing pretty well. Dolan was in charge of the former ABC stations, and their performance has been dismal at best. The latest move puts the former ABC stations directly under Farid, not Judy, so apparently he still doesn't trust her with the keys to the Rolls.

Word is that the agreement with Disney negotiated Disneyesque severance for any ABC employees released prior to June of this year. There's also a big payment due in June. Apparently, Farid is so desperate for cash that he's willing to eat the Disney severance package in order to cut costs. I'm guessing that we'll see another round of cuts at the former ABC stations very shortly because Farid needs cash NOW.

If Farid can't come up with the money, it will be interesting to see what happens. Does Disney get the newly-stripped ABC stations back? Does Citadel still owe Disney a chunk of change in spite of the give back? Is Chapter 11 a viable scenario to prevent a break-up? Is the damage done to both ABC and the former Citadel stations irreparable?

It's pretty obvious that Farid overreached on this one. You'd think that a "Spreadsheet Wizard" would know better.

 

[Bob1370]

"If Farid can't come up with the money, it will be interesting to see what happens. Does Disney get the newly-stripped ABC stations back? Does Citadel still owe Disney a chunk of change in spite of the give back? Is Chapter 11 a viable scenario to prevent a break-up? Is the damage done to both ABC and the former Citadel stations irreparable?"

My guess is that the Mouse, having taken the money and run when the getting was good, could easily step in and grab the whole Citadel package back at a huge discount the moment the economy shows any new life...and it wouldn't take a whole lot of effort, or even a whole lot of money, to repopulate the stations with enough good talent to compete and make money again.

I hope that's what happens.