No Clear answer

Radio company weighing all options

Clear Channel Communications stock enjoyed a 10.7% rise last week as chatter of a buyout emerged.

Wall Street analysts quickly took sides, some arguing it was unlikely buyers would pay much of a premium for Clear Channel while others speculated there could be a bit of an upside to Monday's $34.47 close.

Merrill Lynch analyst Laraine Mancini estimated private equity groups would pay as much as $41 a share for Clear Channel, though others figure it wouldn't fetch more than $37, if it sells at all.

Clear Channel issued a statement saying that it hired Goldman Sachs & Co. to help it sift through its financial options and said that "there could be no assurance that this process will result in any specific transaction."

Plus, competition from satellite radio and iPod-enabled cars are crimping the radio industry, possibly discouraging the emergence of competing bids for the nation's No. 1 radio company.

"We would not recommend that investors put new money to work in the stock because we do not believe the company will be taken private and we view the shares as fully valued at these levels," Credit Suisse analyst John Klim said.

BMO Capital Markets analyst Leland Westerfield, though, upped his target on Clear Channel shares by $2 to $36 and said the move by management to explore its options, presumably including a buyout, has been well thought out.

"The press may construe a privatization as reaction done in frustration with downtrodden radio stocks. Hogwash, we say," he says.

Instead, Westerfield calls it a "decisive third and culminating step in a plan to navigate Clear Channel ownership through the media post-consolidation era."

Previous steps were a share buyback, spinning off the Live Nation business, the initial public offering of Clear Channel Outdoor and the launch of the Less Is More initiative that has cut radio ad time by more than 20% at Clear Channel stations.

Less Is More, Westerfield argues, allows for potential new owners of Clear Channel to rapidly boost revenue simply by reinflating commercial time.

Westerfield speculates that the key to any deal is to minimize tax exposure on gains to the founding Mays family. The analyst says he can imagine a complicated procedure that would first consist of an offer to exchange Clear Channel Communications shares for Clear Channel Outdoor shares. Then, among other steps, a tax-free separation of Outdoor from the radio and TV businesses would be followed by an auction for the radio and TV assets.
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