Clear Channel Buyout Stalled

A private equity group that offered to purchase Clear Channel Communications last year is waiting for approval of the sale from shareholders, and could be waiting for some time amid concerns investors are getting shorted in the $18.7 billion buyout.

CCC’s board of directors approved Thomas H. Lee and Bain Capital’s bid of $37.60 per share in November. At the time, the offer represented a premium of nearly 25 percent more than the company’s average closing share price of $29.99 during October.

But since the announcement, shareholders have been slow to support the deal.

CCC’s largest holder, Fidelity Management & Research, told the company it won’t vote to approve the current offer, the Wall Street Journal reported.

At least three of CCC’s top investors, which hold more than 16 percent of the stock, have indicated opposition to the buyout, the WSJ said, and could threaten the two-thirds vote needed to approve it.

Some investors are apparently wondering why they should be inclined to sell now if the company means enough to a private equity group to purchase with its own money.

Henry Ellenbowgen, co-fund manager of T. Rowe Price Media and Telecommunications Fund, a significant CCC shareholder, told the WSJ investors may be wising up to the fact that companies like CCC could become more profitable by taking the same steps some private equity firms are taking to cut costs.

"It’s not only a company issue, it’s a systematic issue," Ellenbowgen said. "As a marketplace, you can’t have an asset where people run it poorly, and put in incentives for them to cash it out at a lower price."

Investors may also be wary of the Mays family’s motives behind the sale.

The family, which founded CCC years ago, owns a 7 percent stake in the company and stands to make more than $1 billion from the deal.

Mays sons Mark and Randall would continue to hold their executive positions in the company, while chairman and patriarch Lowry Mays would play an active role following the acquisition, the company said.

CCC’s board is reportedly bound by the terms of the deal to either recommend the sale to shareholders or face a $500 million penalty payable to the private equity group. If the board can’t muster up the two-thirds vote needed for approval, it will pay a lesser fee of $45 million to Lee and Bain for the failed agreement.

Sources close to the deal told the WSJ a vote will likely take place at the end of March.