Clear Channel Communications' meteoric rise from small-time radio station owner to colossal media company has often been tempestuous, with consumer and antitrust advocates hounding the giant. But these days, the loudest cries are coming from stockholders.
Investors were offered $37.60 in cash per share, or $18.7 billion, and the assumption of $8 billion in debt by a private equity group in November.
The buyout offer, led by Bain Capital Partners and Thomas H. Lee Partners, is the fifth largest in U.S. history and a 10.2% premium over the closing stock price the day before the offer was announced.
But some shareholders of the nation's largest radio station operator are signaling it isn't enough, given the strong performance of its billboard and outdoor advertising segment.
Clear Channel's largest shareholder indicated weeks ago it would vote against the deal and efforts to block it are gaining momentum.
The uncertain fate of the deal led the board last week to postpone its shareholder meeting, initially scheduled for Wednesday, until April 19. The change will make more recent shareholders eligible to vote, an apparent bid to increase the odds of approval.
"There's no doubt the delay in the vote stems from management's concern that they haven't gathered enough support to push through the deal," said Stanford Financial Group analyst Fred Moran. "They must have gotten indications there was enough dissension that they wouldn't get it approved."
Two-Thirds Support Needed
To win approval, two-thirds of shareholders must support the deal. Shareholders who don't vote will be counted against the buyout.
Fidelity Management and Research, which has been selling shares but still owns nearly 10% of Clear Channel's outstanding stock, plans to vote against the offer, and others are likely to join Fidelity, analysts say. Institutional investor adviser Glass Lewis recommended shareholders oppose the deal.
"The deck is starting to look like it's really stacked against" the buyers and the supporting Clear Channel board, said RBC Capital Markets analyst David Bank.
The buyers have signaled they do no intend to raise their offer. And company officials have repeatedly said they shopped for the best deal, and the cash offer by the equity group was substantially better than the average stock price before the company announced it would look at options like the buyout.
"We firmly believe there is not another competitive bidder for Clear Channel, and that $37.60 per share in cash maximizes value and certainty," the board said in its letter to shareholders.
Bank said the delayed vote may give Clear Channel's management team time to figure out whether the deal can be sweetened enough to win approval or whether -- if recent market volatility continues -- unnerved shareholders might be won over.
"If you see weakness in the market, people might not want to take on the risk," he said, noting that the advertising market could worsen and encourage shareholders to take the cash while they can.
He puts the odds of the deal closing at 50-50.
Unusual Critics
Clear Channel management's current disagreement with some shareholders has been in contrast to its usual critics: consumer groups and antitrust regulators.
The San Antonio-based company, started by L. Lowry Mays and B.J. "Red" McCombs in 1972, remained a relatively modest venture until media ownership rules and regulations relaxed in the late 1990s -- just as the dot-com boom was fueling enormous demand for advertising.
Clear Channel quickly grew to include 1,300 radio stations along with a television group, outdoor advertising and event-staging, a business line that has since been spun-off and renamed Live Nation. Consumer groups charged Clear Channel was homogenizing programming and harming listeners, and investigations into payola allegations were launched.
"Clear Channel, several years ago, became synonymous with everything that was wrong with radio," said Michael Bracy of the Future of Music Coalition, an advocacy group that has argued that regulatory laxness with the public bandwidth has hurt listeners. "All of the energy goes into cutting costs and streamlining, which doesn't translate into the best radio."
As pressure from other music formats like the Internet and satellite radio has increased, the company has divested some of its radio holdings. It announced in November, at the time of the buyout offer, it would sell its television group and nearly 450 radio stations in smaller markets.
Still, with plans to hold onto roughly 700 radio stations, most in the largest media markets, Clear Channel remains a radio behemoth.
If successful, the new owners may be required by the Federal Communications Commission to sell some stations, but it's not clear that smaller independent owners could afford them anymore, Bracy said.
"We don't know enough about how this would play out because this is uncharted territory," he said.