Sale talk drives Clear Channel to 9.7% gain

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Clear Channel Communications Inc., the nation's No. 1 radio company, saw its stock jump 9.7% on Thursday -- a day after it acknowledged that it might be for sale, though the announcement encouraged its bond rating to be cut to near junk status.

Shares of Clear Channel rose $3.13 to $35.48, giving the company a market capitalization of about $17.6 billion.

Standard & Poor's and Fitch Ratings cut Clear Channel's debt to "BBB-minus," their lowest investment-grade ranking.

"While there are numerous possible outcomes from this announcement, Fitch believes that on balance there is a higher likelihood of a negative outcome for bondholders," Fitch said.

"Because of the potential size of the buyout, Standard & Poor's expects the equity contribution to be small, resulting in significant levels of additional debt," S&P said.

Reports began surfacing this week that private-equity groups Kohlberg Kravis Roberts and Co., Blackstone Group and Providence Equity Partners might, as a group, make an offer for Clear Channel. Thomas H. Lee Partners might also be forming a bidding group, according to published reports. All of these firms except for Providence are investors in VNU Group, parent company of The Hollywood Reporter.

In response to all the buyout chatter, Clear Channel said late Wednesday that it has hired Goldman Sachs & Co. for assistance in "evaluating various strategic alternatives to enhance shareholder value" (HR 10/26).

Observers had been speculating on and off that Clear Channel might attract a buyer, as its share price has been on a slow, four-year slide from $50.

Some analysts were cautious Thursday, advising clients not to chase the stock higher as Clear Channel, faced with mounting competition from satellite radio and in-car iPods, might not fetch much of a premium.

Stifel Nicolaus & Co. analyst Kit Spring, however, raised his price target on Clear Channel shares $2 to $38.
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