The buyout groups bidding for U.S. radio operator Clear Channel Communications have suggested sweetening their offer by allowing shareholders to co-invest in the firm, as a key vote on the deal approaches, a source close to the situation said on Sunday.
The bidders have suggested a broad package of adjustments to improve the $19 billion offer, the main change being to allow existing shareholders to take a stake in the group following the buyout, a strategy known as a stub.
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The options were outlined in a letter sent by the bidders to Clear Channel , the source said.
While still under discussion, the proposal was understood to include a slight increase in price but exact terms could not be learned. Discussions between the bidders and Clear Channel about the various options are ongoing, the source said.
Buyout firms Thomas H. Lee and Bain Capital's $37.60-a-share offer has run into resistance from some shareholders and proxy advisory firms, who argue that the deal undervalues the company.
The stock closed up 0.5% at $36.24 on Friday. It has gained over 4% in the last month.
Part of the difference of opinion about how much Clear Channel is worth is based on investors' and analysts' views on the radio industry -- some of whom are more bullish on growth prospects for radio than T.H. Lee and Bain are.
Allowing shareholders to participate in Clear Channel after the buyout could be one way to appease investors who want to share in any improved growth they predict.
It is yet to be seen whether a potential small rise in the deal price will be enough to sway investor feeling, or whether shareholders will demand a more significant price improvement.
Bain and T.H.Lee spokesmen declined to comment and a spokesman for Clear Channel was not immediately available.
Scott Sperling, co-president of private equity firm Thomas H. Lee, speaking at the Reuters Hedge Funds and Private Equity Summit on Tuesday, said that the bidders were not ruling out raising the price.
Sperling also said at the Reuters summit that he was "evaluating the situation pretty carefully," though he stressed that he was prepared to lose the deal and was "constrained by the realities of the numbers" with the radio industry slowing more than he anticipated when inking the offer.
He added that the April 19 vote was a difficult hurdle. Under Texas law a proposal has to be approved by two-thirds of all the company's shares, as opposed to a percentage of the shares actually voted.
Highfields Capital Management, which owns roughly 5% of Clear Channel, said in March it would vote against the deal. Another major shareholder, Fidelity Management & Research, plans to vote against the deal, a source familiar with the matter said previously.
Bain and T.H. Lee in November beat out a rival consortium in their pursuit of San Antonio, Texas-based Clear Channel. The rival bidders included Providence Equity Partners, Blackstone Group and Kohlberg Kravis Roberts, sources said at the time.