Un-Clear Channel Buyout

A buyout offer for Clear Channel Communications by Bain Capital Partners and Thomas H. Lee Partners looks like it could be hitting the rocks, with shareholders questioning the value of the offer and a financial advisory group recommending against the sale. A vote on the buyout has been postponed as a possible result.

The private equity firms made an $18.7 billion offer for the media giant, formerly the parent of Live Nation, in November. The offer works out to $37.60 per Clear Channel share.

The offer apparently sounded good at the time, but not all of the company’s shareholders thought the deal made sense. In the time since, dissident shareholders and financial advisers, including Glass Lewis, have rallied against the buyout.

"This might not be the right time to sell Clear Channel," Glass Lewis told shareholders, according to Forbes. "Investors would be hard-pressed to approve the transaction merely on the merits of the valuation."
A vote on the transaction, which requires 67 percent shareholder approval, was postponed from March 21st to April 19th, possibly in part because of an analyst’s report that one-fifth of the company’s stock has recently changed hands – and the delay makes new shareholders eligible to vote.

"There’s no doubt the delay in the vote stems from management’s concern that they haven’t gathered enough support to push through the deal," Stanford Financial Group analyst Fred Moran said. "They must have gotten indications there was enough dissension that they wouldn’t get it approved."

Glass Lewis reportedly said the $37.60 offer was too low because Clear Channel is worth $39.71 to $41.40 per share.

According to Forbes, Banc of America Investment Services analyst Jonathan Jacoby wrote in a client note that in the first two weeks of March, Clear Channel stock averaged $35.60 but rose to an average of $36.60 in the week prior to the originally scheduled voting date.

New shareholders could earn an annualized return of 8.5 percent if the deal is approved and completed by mid-November, Jacoby said. "We believe management seems to be banking upon the support of recent buyers of the stock," he wrote.

If the buyout is approved, Jacoby argued that investors could net an 11 percent annualized return based on a last trade of $35.10 and a conservative assumption that it would take a full year from last November to complete the transaction, according to Forbes.

If the deal is rejected, Jacoby thinks stockholders will still profit because shareholder pressure will drive value, making Clear Channel stock worth at least $42 over the next 12 to 18 months, the magazine said.