Clear Channel watchers look for Plan B


Does Clear Channel Communications Inc. have a Plan B?

That is the question analysts and industry watchers are wondering after the largest U.S. radio station operator this week delayed a shareholder vote on a $19-billion buyout offer from the founding Mays family and private equity firms Bain Capital and Thomas H. Lee Partners LP.

Opposition to the deal has been mounting, with various analysts saying investors deserve more than the current offer of $37.60 a share, and the deal needs two-thirds of votes cast by shareholders to pass.

Clear Channel said it moved the vote to April 19 from March 21, enabling shareholders who bought shares since the original record date of January 22, to vote.

Analyst Jim Boyle of CL King & Associates said he believes the postponement will not change the outcome of an expected failure for the deal.

"We do not believe the delayed merger vote should prevent shareholders from voting down the initial proposed offer ...despite the extra time management will have to lobby a changed shareholder base," Boyle said.

A source familiar with the matter told Reuters that Clear Channel's largest shareholder, Fidelity Management & Research Co., planned to vote against the deal. Advisory firm Glass Lewis & Co. this week urged shareholders to reject it.

These factors are leading some analysts to conclude that Clear Channel management should be considering alternatives.

"In recent meetings, Clear Channel has suggested that there is no 'Plan B' should the current $37.60 buy-out bid not be accepted by shareholders. This seems implausible," wrote Victor Miller, analyst with Bear Stearns.


Miller said the company could achieve a valuation of $44 per share through various actions, including selling non-core assets, taking on more debt.

Glass Lewis put the company's value at $39.71 to $41.40 per share.

When asked what the company would do if the deal fell through, a Clear Channel spokesman said the company's "directors conducted a thorough and extensive public auction process involving multiple potential buyers before determining that the Bain and THL Partners offer presented the best and most certain value for shareholders."

But analysts said the vote's postponement shows that Clear Channel management is nervous. "It's not a great sign," said Troy Johnson, who manages the Absolute Return Fund for Quixote Capital Management.

"It will be a challenge, but by postponing it they hold out hope that they can convince additional shareholders to vote their direction," he said.

David Bank, an analyst at RBC Capital Markets, said the projected outcome was too close to call, but that he believes Clear Channel would remain public, even if the deal is voted down.

"I don't think the current bidders are going to make another run at it with a higher price at a later date and I don't think there's likely to be another bidder," he said.

Johnson said he did not see much downside if the deal does not go through. "I think it will be close," he said. "We are in favor of the deal going through here."

Independent proxy advisory firm Proxy Governance earlier this month recommended that shareholders accept the deal but had some reservations.

The highest-profile advisory group, ISS, has not yet weighed in on the Clear Channel deal.

Clear Channel agreed to the all-cash, $37.60-per-share offer last November. It said that was a 28-percent premium to the average closing share price in the 60 days up to October 24, when it disclosed it was considering its options.

Clear Channel stock was up about 1% at $35.49 on Thursday on the New York Stock Exchange.