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Clear Channel Pressure Intensifies as Vote Nears

The private equity firms bidding for Clear Channel Communications will be looking for an indication from the radio operators' board on Monday as to whether their revised $19.6 billion bid will be reconsidered, a source familiar with the situation said.

The bidders were also considering minor tweaks to their offer, although they were not looking at hiking the price further, the source told Reuters late Sunday night.

Clear Channel rejected the $39.20 a share proposal from Bain Capital Partners and Thomas H. Lee Partners on Thursday, saying in a statement that accepting the offer would delay the date of a special meeting by up to 90 days, with no certainty the transaction would be approved by shareholders.

Instead it would put a $39 offer the bidders previously made to shareholder vote on Tuesday.

That $39 offer looks set to be voted down, as Clear Channel said on Thursday that tabulated proxies received so far show a vote against the deal of more than the required one third of the shares necessary to defeat the proposal.

It was unclear what the board's latest thinking was. Clear Channel declined to comment.

As the day of the vote nears, shareholders continued to put pressure on Clear Channel to reconsider the revised bid.

One shareholder who declined to be identified said on Sunday that it had been phoning Clear Channel's directors to ask them to reconsider the new proposal.

If the board refuses to put the higher bid to shareholders, that shareholder said: "All bets are off in terms of voting for directors at the next (shareholder) meeting."

Pressure to Rethink

Three shareholders told Reuters on Friday they were upset the new proposal was dismissed so quickly and said they were putting pressure on the board to rethink. The shareholders, one of which described itself as a top 20 shareholder, all spoke on condition of anonymity.

The Clear Channel deal faces a particularly difficult hurdle because under Texas law, two-thirds of the company's shares must approve the transaction, not just two-thirds of the votes cast. That means shareholders who fail to vote are counted as voting against the deal.

Bain and T.H. Lee originally made a $37.60-a-share bid to buy Clear Channel in November.

The bid ran into trouble when a small number of institutional shareholders and influential proxy advisory service ISS said they opposed the deal, arguing that it undervalued the company. In April, they increased the offer to $39 a share, but the shareholders still indicated opposition.

Late on Thursday, Clear Channel said in a statement it received a new proposal from the bidders to increase the offer to $39.20 a share to unaffiliated shareholders. The founding Mays family and Clear Channel board would receive the price originally recommended of $37.60 a share.

The increased cash for shareholders was proposed to come from reducing the amount the Mays family and board received, rather than the bidders increasing the amount they paid, sources familiar with the situation said early on Friday.

The new offer also gave shareholders a choice between cash and stock in the surviving company as shareholders could take an interest in the privately owned company.

The latest proposal could be viewed as a leveraged recapitalization rather than a buyout, with 30% of the equity to be held by current public shareholders and the securities still registered, the source who spoke to Reuters on Sunday said. A leveraged recapitalization is when a company takes on a large amount of debt and makes a large cash distribution to shareholders.

The revised structure had been supported by, and was the result of cooperation with Highfields Capital Management, a significant shareholder originally opposed to the bid, sources told Reuters last week.

Fidelity had previously indicated it would vote against the deal, a source previously told Reuters. A source close to Fidelity and familiar with the matter said on Friday that its position was unchanged.

Clear Channel shares closed 1% higher at $36.35 on Friday.