CLEAR CHANNEL BOARD AGREES TO HIGHER BID Megan Davies and Sue Zeidler – Reuters Clear Channel Communications Inc. said on Wednesday it agreed to a higher buyout offer from Thomas H. Lee and Bain Capital, but some analysts said the new bid still fell short of investor demands.
The buyout firms raised their offer for the leading U.S. radio station operator by 3.7 percent to $39 a share, valuing the company at about $19.5 billion.
Their earlier bid of $37.60 a share had run into resistance from some shareholders and proxy advisory firms, who argued that the deal undervalued the company. That put the buyout firms under pressure to increase the bid.
Analysts said the latest offer falls short of the key $40 a share level some investors had rallied for in recent weeks.
The increased bid comes one day before shareholders had been scheduled to vote on the original deal, with many analysts predicting it would fail to get the votes needed to pass.
The new offer raises the odds, but is not considered a home run, according to analysts.
"It's not exactly a slam dunk. Both sides will continue to posture and the soap opera continues and the plot thickens," said James Boyle, analyst with CL King & Associates.
Earlier this week, Calpers, the biggest U.S. pension fund, said it voted against the earlier proposal, while Highfields Capital Management, which owns roughly 5 percent of Clear Channel, said in March it would vote against the deal.
A source familiar with the matter had also said that Fidelity Management & Research Co. had planned to vote against the deal. Fidelity was not immediately available on Wednesday.
And late last month, Institutional Shareholder Services, the largest investor proxy advisory service urged Clear Channel shareholders to vote against the $19 billion bid.
The deal needs two-thirds of votes cast by shareholders to pass. Clear Channel had previously moved the vote to April 19 from March 21, enabling shareholders who bought shares after the original record date of January 22 to vote.
Various analysts have said the company could achieve a higher valuation through alternative means, such as selling off non-core assets and taking on more debt.
David Bank, analyst with RBC Capital Markets, said he did not think the new offer was high enough to satisfy some of these big stakeholders. "For Fidelity and Highfield, this is likely not a high enough offer," he said.
"I think the private equity firms are hoping that with $39, the proxy advisers will go back and reassess and that they will convince all the other big investors besides Fidelity and Highfields to take the deal," he said.
Clear Channel on Wednesday said it sent updated proxy materials to shareholders and has rescheduled the special meeting of shareholders to May 8 to allow shareholders time to consider the increase in merger consideration.
Clear Channel said that shareholders of record as of March 23, 2007 remain entitled to vote at the special meeting.
In conjunction with the increased cash purchase price, Clear Channel agreed to pay certain fees if the merger does not close and Clear Channel subsequently consummates a sale of the company. |