T.H. Lee not ruling out Clear Channel bid raise

NEW YORK (Reuters) - Thomas H. Lee Partners is not ruling out raising its $19 billion buyout offer for radio station operator Clear Channel Communications Inc. (CCU.N), its co-president said on Tuesday, adding that an upcoming shareholder vote on the deal was too close to call.

Scott Sperling, co-president of private equity firm Thomas H. Lee THL.UL was "evaluating the situation pretty carefully," though he stressed that he was prepared to lose the deal and was "constrained by the realities of the numbers" with the radio industry slowing more than he anticipated when inking the offer.

Sperling, speaking at the Reuters Hedge Funds and Private Equity Summit, said a majority of Clear Channel shareholders support the $37.60-a-share offer tabled by T.H. Lee and buyout firm Bain Capital, but that the April 19 vote, which needs support from two-thirds of all Clear Channel's shares -- rather than just the shares cast -- to win, is a difficult hurdle.

There has been opposition from some shareholders and proxy advisory firms to the deal, who argue that the deal price undervalues the company. Highfields Capital Management, which owns roughly 5 percent of Clear Channel, said in March it would vote against the deal. Another major shareholder, Fidelity Management & Research Co., plans to vote against the deal, a source familiar with the matter said previously.

Analysts at Bear Stearns have argued in research reports that Clear Channel could pursue a "Plan B" which could generate a higher share price than the $37.60 on offer. This could include selling assets such as its outdoor advertising division and paying out a dividend, the analysts have argued.

Sperling said he, and the majority of shareholders he'd heard from who supported the deal, were doubtful that the stock would go up if it gets defeated. Clear Channel's shares closed up 27 cents at $35.82 on the New York Stock Exchange.

He cited in part a difference of opinion about how people viewed prospects for Clear Channel's radio operations.

Sperling thought the Lee and Bain consortium was paying an "incredibly premium price" for Clear Channel but conceded that there were "obviously ... people out there that don't think so."

"This was a squeeze-it-as-hard-as-you-can auction that we were able to win," Sperling said. "We are very happy that we won it. We are not as happy about the level of the price that we had to pay and it puts constraints on the flexibility that we have to respond to it, so we are evaluating the situation."

Bain and Thomas H. Lee in November beat out a rival consortium in their pursuit of San Antonio, Texas-based Clear Channel. The rival bidders included Providence Equity Partners, Blackstone Group BG.UL and Kohlberg Kravis Roberts KKR.UL, sources said at the time.

Sperling said the vote was a difficult hurdle because under Texas law, it has to be approved by two-thirds of all the company's shares, as opposed to a percentage of the shares actually voted.

"What we do know is that a majority of the shareholders are going to vote in favor of the deal, it's just hard to tell the exact magnitude," Sperling said. "Every vote is crucial, to be honest. I really have no idea how it will go."

The April 19 voting date is a delay from the original date of March 21. Clear Channel moved the date in March, saying that there had been substantial trading volume in its shares and the date move would allow shareholders who bought shares recently to participate in the vote and receive proxy material in time.

Sperling said that moving the date better aligned the people who owned the shares with those who were going to vote.

The date change allowed the record date -- the deadline by which investors must hold shares in Clear Channel in order to be able to vote on the deal -- to be moved from January 22 to March 23.

Spearling said there had been a number of people who had bought shares after the original record date who were upset that they did not have the right to vote.