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 Clear Channel Communications Inc. will hold a shareholder meeting July 24 to vote on its revised, multibillon-dollar leveraged buyout by Bain Capital LLC and Thomas H. Lee Partners LP. If approved, the deal will finally close July 30. The price was revised down May 13 to $36 per share from the $39.20 shareholders agreed to in September, with a $1.6 billion haircut to the $25 billion original, after much back and forth, litigation and finally a settlement.
The San Antonio company's private equity buyers, THL Partners and Bain
Capital, sued in New York state to enforce the letters of commitment
underlying the buyout and along with Clear Channel filed suit in Texas
state court charging the lenders with tortuous interference with the
deal. The New York trial was scheduled to start May 12 and adjourned a
day, while the Texas trial was also adjourned.
A week earlier, a New York state court threw out three of four claims made by Bain and THL Partners, leaving only the firms' breach of contract claim, at the heart of the suit. The news came weeks after the lenders -- Citigroup Inc., Deutsche Bank Securities Inc., Credit Suisse Securities LLC, Morgan Stanley, Wachovia Bank NA and Royal Bank of Scotland Group plc -- offered to let an arbitrator decide the dispute over terms of their credit agreement, which the buyers rejected. In late March, Bain, THL Partners and Clear Channel sued the bank consortium alleging "lenders' remorse" was involved in backing out of commitments to provide the financing. The banks contended the lawsuits, filed in Texas and New York, were without merit. The battle then centered on which court would hear the dispute and when; a judge ruled April 2 it would be a Texas state court, rather than a federal court as the banks had wanted. All the while, the banks faced investor pressure, as well. STATIC INTERFERENCE Confirming what had been thought possible for months, Clear Channel Communications Inc. said March 28 its $25 billion LBO might not happen at all. The confirmation came via a regulatory filing in which the media company noted a meeting March 27, which went unattended by the banks financing the deal, Clear Channel and its would-be buyers THL Partners Bain agreed that all closing conditions had been met. Clear Channel was given a temporary restraining order March 26 against the banks that restricted their ability to interfere with the deal's close. The deal's fate highlights how dicey risk arbitrage can be given the current credit markets, The Deal's Scott Stuart noted March 28:
The deal gained
approval from the Justice Department in mid-February. Two months
earlier, Clear Channel pushed back its expected date of completion from
the end of 2007 to the first quarter of 2008, but said it was
"confident that the necessary regulatory conditions will ultimately be
satisfied." The announcement came days after the $1.2 billion sale of
Clear Channel's television group to Providence Equity Partners Inc. won
FCC approval Nov. 29, despite warnings earlier in November that the deal could fall apart. After a separate fight, that deal closed March 14. The Deal's Chris Nolter noted:
As The Deal's Ron Orol pointed out Dec.3:
Meanwhile, the radio deal was still pending. Company officials had hoped to win approval for the TV station sale ahead of clearance for its larger buyout to avoid interfering with FCC radio-television overlap rules, Orol wrote in October. Shareholders approved the radio buyout Sept. 25, after two bumps in the offer price and a consequent, unhurried regulatory review. All that stands in the way is formal regulatory approval. The Federal Communications Commission and the radio and outdoor advertising company's buyers have agreed to certain terms, sources told Orol, related to their other media holdings. The review of the radio assets, sources told Nolter, wasn't rushed, because shareholder approval wasn't certain. Opposition evaporated, and in addition to 448 planned divestitures, the FCC identified 30 others stations Clear Channel will likely have to sell, given FCC ownership restrictions. The shareholder vote came nearly four months after Clear Channel struck a new merger agreement with its buyout consortium hoping the latest one would pass shareholder muster, and it gained the favor of one vocal shareholder: Highfields Capital Management LP said May 30 it would vote its 5% stake in favor of the deal. The news came weeks after the broadcaster spurned a revised offer from its proposed acquirers and subsequently delayed a shareholder vote on the deal, saying it would revisit discussions. Trying to push through the take-private, Clear Channel's founding Mays family, Bain and TH Lee bumped up their offer from $37.60 a share to $39 apiece. Days later, citing positive developments that outweighed the increase, Institutional Shareholder Services Inc. said May 1 that it still recommended shareholders vote against the deal. Days later still, Clear Channel fielded an increase from $39 a share to $39.20 a share, or nearly $27.4 billion, though at the time said it wouldn't take it to shareholders for a vote. Details of the revised offer were scant and one shareholder suggested investors would value the chance to hold stock in the company, nudging Clear Channel to offer more details about the revised offer. At the time of the bump, the San Antonio-based broadcaster said the increase was insufficient to delay a vote, but investors cried out, the company said in a May 7 statement. The vote is was set for May 22, only to be rescheduled again. The mid-April increase to $39 a share, up from a $37.60 a share bid agreed to in November, came on the eve of a meeting in which shareholders were expected to vote down the buyout. AS GOOD AS IT GETS? As The Deal's Christine Idzelis noted, a Merrill Lynch & Co. research report
"opined that 'a majority of dissenting investors would have preferred a
$40-plus offer,' but it said the new offer 'may be sufficient to entice
arbs and short-term investors to vote for the deal.' Merrill
calculated, however, that the buyers could afford to pay up to $41 a
share and still earn a 20% return."
What remained in question for some time was whether the sweetener would be enough of a boost to placate dissidents.
The relatively slim increase indicated different things for different
people. One source told The Deal's Scott Stewart the deal stretched the
bidders thin, while others contended the increased debt financing
indicated the buyers could still pay more. Clear Channel announced a "strategic realignment" in April 2005, spun off its live-entertainment unit, spearheaded an initial public offering of its outdoor-advertising division
and paid a special dividend to shareholders and a 50% boost in the
quarterly dividend, which did little to the stock price and drew
further shareholder fire. In August 2006, management turned to Goldman,
Sachs & Co. to conduct a strategic review, announced Oct. 25. At the same time, sources told The Deal that Clear Channel was considering filing a formal petition to the FCC seeking to raise the limit on how many stations one company can own in the largest individual U.S. markets.
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