ISS advises against Clear Channel deal
EmptyNEW YORK -- Influential proxy advisory service ISS recommended Tuesday that shareholders of Clear Channel Communications Inc. vote against a $19.5 billion bid to take the radio station operator private.
Analysts said recommendation could mean that the buyout gets voted down by shareholders at a scheduled meeting on May 8.
ISS, which advises fund managers and pension funds on various issues, recommended on March 29 that shareholders reject a takeover offer of $36.70 a share, or $19 billion, from Thomas H. Lee and Bain Capital, arguing that it
undervalued the company.
Under pressure from some shareholders, the bidders in April raised their offer to $39 a share, or $19.5 billion. That was a 33% premium to Clear Channel's shares before the company said in October it would seek strategic alternatives, the bidders said.
ISS said in an emailed document, dated May 1, that the sweetened bid was not compelling enough for it to change its recommendation.
A copy of the document was obtained earlier by Reuters.
"They (the bidders) had so little wiggle room -- they really needed this vote," said David Bank, an analyst with RBC Capital Markets. "You never say never, but I think it will be very difficult to get shareholder approval."
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.
Some major institutional shareholders have indicated they are unsatisfied with the $39 offer and would oppose the deal.
A source close to Fidelity Management & Research Co. said last month the firm would not change previous plans to oppose the deal. Another source familiar with the matter said Highfields Capital Management LP would not change its plans to oppose the deal.
John Blackledge, analyst at JP Morgan, said it would now be "challenging' for the consortium to get the requisite votes.
He added that it seemed unlikely that the bidders would raise their bid again, given that they previously described the $39 price as their "best and final" bid.
RBC's Bank shared that view, saying the importance of the private equity players maintaining financial discipline was probably more important than getting a deal "done at any price."
Bank added that he thought the bidders were unlikely to
pull the deal despite a reduced chance of success.
Investors mulling whether to accept the bid will be weighing Clear Channel's long-term stock performance if the offer fails.
Supporters of the deal argue that an uncertain outlook for growth in the radio industry makes it unlikely the shares will gain much. The opposing view is that a price higher than $39 a share can be reached by methods such as splitting the company up and paying a special dividend.
Clear Channel shares closed 17 cents higher at $35.60 in afternoon trade on the New York Stock Exchange.