Clear Channel Agrees to $18.7 Billion Buyout
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Clear Channel Communications Inc. agreed Thursday to be bought by Thomas H. Lee Partners and Bain Capital for $37.60 a share, or $18.7 billion, ending a three-week auction of the radio giant. The transaction has a total value of about $26.7 billion, including $8 billion of debt, and represents a 10.2% premium to Clear Channel’s close Wednesday.
The deal signals an end to both a speedy takeover pursuit and the public history of Clear Channel, which the Mays family built into the country’s largest radio chain. With their capture of one of the largest private deals this year, private equity firms also have cemented their place as deep-pocketed and aggressive suitors for even the largest prizes.
Still, a Clear Channel takeover isn’t simple. Securing regulatory approval could be lengthy, and — as other private equity buyers have done this year — Clear Channel was given room to shop around for a better deal for several weeks. Separate from the takeover announcement, the San Antonio-based company also said it will seek to sell more than a third of its 1,150 radio stations and its 42 television stations.
Clear Channel said in a filing with the Securities and Exchange Commission that it expects the deal to close in the fourth quarter of 2007 or the first quarter of 2008.
The announcement of a deal comes just weeks after Clear Channel formally put itself in play, announcing it was evaluating strategic alternatives for boosting its stock price. Company shares had fallen roughly 60% from its high in early 2000 as people spent less time listening to radio amid competition from satellite radio, iPods and other entertainment options.
The battle for Clear Channel pitted Thomas H. Lee and Bain against another private-equity group consisting of Providence Equity Partners, Kohlberg Kravis Roberts & Co., and Blackstone Partners. Texas Pacific had been part of the Thomas H. Lee and Bain group until dropping out this week.
Spokesmen for KKR and Blackstone declined to comment Thursday.
The purchase price represents a 16.2% premium from when the radio company first said it was mulling strategic options. Clear Channel shares jumped $1.30, or 3.8%, early Thursday to $35.42.
Analysts expected any merger premium to Clear Channel shares would be limited because the recent slow growth of radio revenue limits private equity buyers’ potential return.
Even so, it is the combination of slow growth and huge cash generation that make Clear Channel and other media properties attractive to private equity groups.
Clear Channel also has assets that its new owners could exploit, such as its outdoor-advertising company, Clear Channel Outdoor Holdings Inc., of which it owns 90%. The Clear Channel Outdoor business could be sold at a time when billboards and other socalled out-of-home advertising are expected to grow faster than other media properties.
The company’s outdoor piece, which drives 40% of revenue, has at least one suitor. Smaller French firm JCDecaux SA said last week that it would be interested in Clear Channel Outdoor.
Still, Clear Channel said Thursday that the company’s merger isn’t conditioned on a merger, privatization or other transaction involving Clear Channel Outdoor.
Clear Channel’s radio network, however, appears to be an integral part of the deal. Clear Channel put up for sale 448 radio stations in 90 markets. The stations, Clear Channel said, are outside the 100-largest radio markets and contributed less than 10% of the company’s revenues last year.
Clear Channel made clear, however, that the sale of the stations isn’t contingent on the closing of the merger agreement.
The radio broadcaster is the latest media company to draw buyout attention from cash-rich private equity.