An interesting partnership was announced December 5, 2011, that sees Cumulus Media's (Nasdaq:CMLS) 570 radio stations in 120 markets available for free on the new iHeart Radio digital radio service. As part of the deal, both companies will advertise Cumulus Media's new daily deals platform, Sweet Jack, which provides members savings of up to 85% on local goods and services. It's just one reason Cumulus Media's stock is going to rise to the clouds. Here are a few others.

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Key Acquisitions
On August 1, the company acquired the remaining 75% of Cumulus Media Partners, LLC for $740 million. As part of the deal, it issued 9.9 million shares of its common stock to the previous owners, which included Bain Capital, The Blackstone Group (NYSE:BX) and Thomas H. Lee Partners. The acquisition gave it 32 radio stations in nine markets including San Francisco, Dallas and Atlanta. Based on revenue, it became the fourth-largest radio station owner in America. (To know more about acquisitions, read Analyzing An Acquisition Announcement.)

Then came an even bigger deal in September when Cumulus swallowed Citadel Broadcasting, the country's third-largest radio broadcaster, for $2.3 billion. The deal makes Cumulus the biggest pure play radio broadcaster in the United States with over 570 stations in 120 markets. Citadel shareholders will end up with 31% of the newly-merged company.

Here's what they can expect from the deal. First, a combined adjusted EBITDA for the trailing-twelve months of $464 million, second only to Clear Channel, its partner on the iHeart Radio deal. That's higher than both Entercom Communications (NYSE:ETM) and CBS (NYSE:CBS) radio division. Second, free cash flow of $1 a share for a yield of 37%, higher than the industry average for TV, Radio, Cable/Pay TV and Diversified Media.

In addition, the deal brings net debt of $2.8 billion or 6.1 times adjusted EBITDA and $52 million in annual cost savings. Investors will see an optimized radio station portfolio where there are overlaps and Cumulus will be introduced into new markets like Chicago, New Orleans and Minneapolis. The deal brings an experienced management team that's led the business through a very difficult period in radio. With advertising picking up, it will be as profitable as it's ever been.

Radio Audience Rising
In the past five years, despite media options available like Pandora (NYSE:P) and Sirius XM (Nasdaq:SIRI), the audience for radio has increased from 230.4 million people in June 2006 to 241.8 million people in June 2011. It hasn't lost its audience even though people who do a lot of driving for work, listen to both free and satellite-radio depending on the time of day and what they want to hear. Satellite radio can never do as good a job localizing content and that's why radio is an ideal venue for discount services like Sweet Jack.

The Bottom Line
Once Cumulus fully integrates Citadel, including the never pleasant task of cutting jobs, the cash flow can begin to grow in earnest. Consolidation in radio makes sense and once the housing and auto industries fully recover, ad revenues will jump dramatically. During a CNBC interview in September, CEO Lew Dickey, Jr. suggested that the deal actually solves some of its near-term debt issues, extending most funding by seven years. Dickey plans to have the company's net debt of 6.1 times adjusted EBITDA down to 4.0 times by the end of 2013. I wouldn't bet the entire farm on Cumulus Media, but don't hesitate to wager the chicken coop or hayloft. Given the potential synergies, its stock is ready to ascend. (For additional reading, check out 5 Must-Have Metrics For Value Investors.)

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At the time of writing, Will Ashworth did not own shares in any of the companies mentioned in this article.