Shareholders consider Clear Channel buyout, again

Delayed and shrunken, the $17.9 billion deal for the nation's largest owner of radio stations and a global power in billboards is finally to close a week from Wednesday if shareholders approve the $36-per-share offer on Thursday.

The deal--in which private equity firms Bain Capital and Thomas H. Lee Partners would assume about $5.9 billion in existing debt and borrow another $16.4 billion to take Clear Channel private--already has regulatory approval. The lenders have deposited their portion of the funding in an escrow account. And no one expects hiccups this time.

"They're prepared to close on the 30th," said Clear Channel spokeswoman Michele Clarke. "Everybody is happy with the revised deal."

Not everyone started out happy.

When the deal was first announced in November 2006, credit was easy to get, ever-larger deals were being announced and some institutional shareholders thought the offer of $37.60 wasn't enough.

They held out twice for more money and a chance to continue owning a portion of the privatized company--concessions equity firms are usually loathe to make.

A consortium of six banks agreed to finance the deal initially, but by the time the shareholders were satisfied and regulators had signed off, the lenders had soured on the deal.

The banks had offered financing assuming they'd be able to sell the debt on the credit market, but as the markets grew increasingly afraid of bad mortgages and other new debt, there were fewer buyers for the Clear Channel debt.

Analysts estimated the banks could be stuck with $3 billion to $4 billion in write-downs as a result, and San Antonio-based Clear Channel and its buyers accused them of trying to break up the deal. Lawsuits followed.

But by May 13, the banks, buyers and company settled with the renegotiated price of $36 per share, less than the original offer once shunned as too small.

No one is complaining this time, given worries that the deal would fall apart entirely as the economy continues to hammer the sluggish radio business.

Investors should be satisfied with the share price they're getting, given the industry's performance, said David Bank, an analyst for RBC Capital Markets.

"If you track the performance of the radio sector over the past year, performance of the group has been absolutely dismal," Bank said. "The fundamentals are bad."

Traditional radio, which has struggled for years against the growth of satellite radio and digital music players, is likely to have its troubles exacerbated by the faltering economy.

"Radio faces a really uphill climb," Bank said.

Clear Channel has cut the number of radio stations it owns to about 900 from a height of 1,300. It also sold its television station group this year.

Outdoor advertising, which is more difficult for consumers to avoid when they're stuck in traffic or riding public transit, has been growing. It represents about half of Clear Channel's revenue.

Clear Channel's outdoor business, about 10 percent of which trades as a separate stock and will continue to do so after the buyout, owns roughly 1 million signs worldwide.

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