Annotated article summary from this weekend's Barron's; receive all our Barron's summaries by signing up here:
Why Clear Channel's Buyout May Go Bust by Andrew Bary
Summary: In less than three weeks Clear Channel Communications Inc. (CCU-OLD) shareholders will vote on a $37.60/share LBO offer from a private equity group led by Bain Capital and Thomas H. Two-thirds of all outstanding shares must approve in order to clear the deal, which seems unlikely: (1) Big institutional shareholders think the offer undervalues the company by several dollars and are likely to hold out for $42+. They include Fidelity (10%) and Noonday Asset Management (1%), which successfully opposed a buyout bid for radio operator Emmis Communications Corp. (NASDAQ:EMMS). (2) It's estimated 10-15% of shareholders won't vote. (3) Clear Channel Outdoor Holdings (NYSE:CCO), which is 90% owned by CCU, is up recently from $21 to $28, increasing CCU's stake by $2 billion. Jeff Jacobowitz of Robotti & Co. says the bid is "way too low" and values shares at $43. If the bid is voted down, shares could dip as the buyout premium dissipates and due to "challenges facing the radio industry" (from a Clear Channel slide show used to pitch the deal). But they could also rise as investors anticipate a spinoff/split-off of CCO, a possible share buyback, the likelihood of Thomas H. Lee and Bain Capital upping their bid, and the notion that CEO Mark Mays and his brother, President Randall Mays will feel pressure to boost shareholder value or risk losing their positions. Barron's says a publicly traded Clear Channel seems the far better deal for investors, and sees the stock hitting $50 within two years.
Related Links: Clear Channel & Citadel: There's Still Life In Radio • Clear Channel: 10% Shareholder Fidelity To Oppose Private Equity Buyout • Clear Channel Q3 2006 Earnings Call Transcript