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Clear Channel Deal to Be Funded at $36 a Share

Clear Channel Communications has resolved a legal dispute with its lenders, clearing the way for its prospective buyers to take the radio and outdoor advertising company private.

Under the agreement, Clear Channel shareholders would receive $36 a share, down from the earlier price of $39.20 a share. That reduces the deal's value to $17.9 billion from $19.5 billion.

Clear Channel's headquarters in San Antonio.
Eric Gay
Clear Channel's headquarters in San Antonio.

The San Antonio, Texas-based company and its private equity buyers, Bain Capital and Thomas H. Lee Partners, had sued a consortium of six banks, accusing them of trying to undermine the deal by changing the terms.

Proceedings in that lawsuit in a Texas court, and a separate suit filed by the equity firms in a New York court, were delayed Monday as the parties continued talks to settle the dispute, which centered around whether the banks must fund promised loans for the takeover.

The amended buyout agreement still requires shareholder approval. Clear Channel said in a statement that it expects the deal to close by the end of the third quarter, but the parties have agreed to extend the deadline for completion of the takeover to Dec. 31.

The equity firms have been struggling to close the proposed deal as the credit markets have faltered and Clear Channel's share price has declined on fears the deal wouldn't close.

A busted deal would subject the private equity firms to roughly $500 million in fees. But funding the loan at the original terms would have cost the banks $3 billion to $4 billion in write-downs, with fewer institutions looking to buy up the debt.

The buyout of the nation's largest radio station operator and a global powerhouse in outdoor advertising has been tumultuous from the beginning.

Announced initially in November 2006, a group of holdout shareholders twice forced the equity partners to raise their offer and to allow some of them to continue owning a minority stake in the firm.

The delays in reaching financial terms and getting regulatory approval for the deal kept it pending as the credit markets seized up and banks, once eager to fund ever bigger leveraged buyouts, got skittish.

As deadlines approached for the deal to get completed, the equity firms and Clear Channel accused the banks of trying to sink the buyout by changing the loan terms, a charge the banks have denied.

Lawsuits accusing Citigroup, Morgan Stanley, Credit Suisse, Wachovia Corp., Deutsche Bank and The Royal Bank of Scotland of tortious interference were filed in March.

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