What If Clear Channel's Sale Fails

Never have so many pulled so hard for so few.

The lines are drawn -- the many people in the radio industry who are hoping that Clear Channel will actually sell off part of its conglomerate and take a small group of radio stations private vs. the few owners and Wall Street money people who hope for a large pay day today and another one down the line if they decide to sell off more assets later.

But shareholders are funny people especially when some of them owned Clear Channel stock in the $90 range and are now holding the same issues in the mid-30's. The Wall Street Journal last week did a piece on the showdown between shareholders and the folks from San Antonio. It might not surprise you that Clear Channel is playing hardball again. Shareholders must approve the Clear Channel sale. That means they must vote "yes" for it. Texas law requires every "non" vote to count as a no vote so this is not that easy. The Journal surmised that Clear Channel would put the matter to the shareholders sometime in March. The hardball part? Clear Channel says if shareholders don't take their offer, they will take their offer off the table. That means Clear Channel will continue business as usual. Business as usual and Clear Channel scares some people.

There are many who are not fans of Clear Channel including some of their own employees who hope this doomsday scenario will never happen.

Wall Street is not unaccustomed to privatization going bad. It's been happening lately in other sectors and it happened to Emmis when a group of independent directors blew up their attempt to go private. Emmis stock has suffered significantly ever since -- off about 35%. The Journal says if the Clear Channel deal blows up, its share price could fall into the mid-20 dollar range. Whatever happened to the consolidator's mantra of "shareholder value"?

If you're pulling for Clear Channel to get its money and get out (with 800 or so stations as a consolidation "consolation" prize), you've got to pray harder. The largest holder of Clear Channel stock, Fidelity Management & Research right now is saying it will vote against the sale to Bain Capital, Thomas Lee Partners and some of the Mays family. At least three of the company's biggest investors are reportedly holding out. Clear Channel needs two-thirds approval to walk away rich and happy. Same can be said for radio people who suddenly find themselves hoping stockholders don't see the hidden benefits of Clear Channel as a public company.

I mean, if the investment group is willing to pay $18.7 billion to take it private, it must be worth something. That's a lot of money. Is it worth a lot of money because it can be sold off for even more money again or is it a free cash flow cow. That, too. In other words, maybe shareholders are thinking that Clear Channel's business isn't such a bad business to be in after all. Maybe it could be run better. More professionally. More vision to the future instead of packing up the marbles and changing the game. Less litigation. More music. Fewer commercials. I'm sorry, I sound like a "sweeper" on a radio station.

The shareholders are awake. Here's what that excellent Wall Street Journal article said:
"Indeed, Clear Channel's dissenting shareholders are advocating that the San Antonio company follow some steps from the buyout shops' own plan: take on a load of new debt while offering more shares of the company's outdoor-advertising unit, selling some international assets, and using a large tax credit gained during the spin off of Clear Channel's concert division at the end of 2005 to sell radio stations tax free."
So if the shareholders douse the deal and the industry's number one consolidator gets to keep running its public company with share prices in the mid-20 dollar range, it could get ugly. If you're working for Clear Channel, could there be even more cutbacks? There have been many cutbacks even though the radio trades have been soft-pedaling them. Could Clear Channel try once again to go private? Maybe, but other companies that have not succeeded have for now backed off.

Imagine what happens when you get San Antonio mad? No, not back then -- now -- if they don't get their way.