Cheaper Channel

Inside Radio is quoting sources as saying the FCC is going to approve the Clear Channel sale to investment bankers Lee and Bain.

Department of Justice approval would likely follow.

Then, sit back and enjoy the action thriller.

You read the headlines. You know that the radio industry is posting declining revenues. Most analysts say the best radio could hope for in 2008 is a flat year. Not exactly a climate that will attract investment capital.

How would you like to be Lee and Bain? If you believe they will actually close on the purchase to take Clear Channel private, they are guaranteeing shareholders $39 a share. CCU closed at $35 yesterday. The buyers are overpaying.

As you know I think one way or the other Clear Channel winds up in the hands of Sam Zell and Randy Michaels, but not before shaving the price down some more.

Sam Zell doesn't pay retail. If he's got his eyes on Clear Channel -- which is what I think -- he's also looking to trim back the price. Perhaps Lee and Bain can do it before they actually decide to close. Imagine their argument: Clear Channel is not worth what it was when they agreed to pay $39 a share. And they would be right.

What they might not say is that they want to flip it to Sam Zell and he isn't going to go for $20 billion. Zell buys discounted investments. That's his M.O.

Hell, it would be worth it to Lee and Bain to flip it even if they had to take the haircut. In the investment market you're only as good as your next deal. Imagine trying to buy other businesses when you've been snookered on a $20 billion embarrassment. Let's just say Lee and Bain have the motive to get out of this very bad acquisition if they want.

And as I've said before, flipping it to Sam Zell -- in total or part -- gets the job done. Zell can also make it worth their while and Lee and Bain live to buy companies another day.

Radio stocks are in the toilet and ready to be flushed.

The industry is losing audience and has no plan to win the next generation.

Cell phones and the Internet -- now they're growth industries.

Radio has no plan to become part of the Internet revolution.

So, what to do?

Sell to Sam Zell after discounting the sale price even further.

Keep your eyes and ears on events surrounding the sale of Clear Channel in the months ahead. I'd like to think that Clear Channel, Lee and Bain and the CCU shareholders are smarter than they look right now. Smart enough to know when to exit stage left.

The only way you could run a business that has seen its finer days is to hand it over to an operator who can't see straight -- looking for the ultimate revenge.

That would be Randy Michaels and Sam Zell.

But first -- time to take a haircut.

Clear Channel may soon be giving new meaning to the words "cheap channel" and it's nothing to celebrate.

For those of you who would prefer to get Jerry's daily posts by email for free, please click here. IMPORTANT: First you must check your mail or spam filter to verify your new subscription before service can begin.
Thanks for forwarding my pieces to your friends and linking to your websites and boards.