Clear Channel shareholders approve buyout

By Megan Davies

NEW YORK (Reuters) - U.S. radio operator Clear Channel Communications Inc's shareholders approved a $39.20-a-share bid from Bain Capital Partners and Thomas H. Lee Partners on Tuesday, paving the way for the largest-ever radio industry private equity buyout, worth nearly $20 billion.

The company said 73 percent of the total shares outstanding were voted in favor of the deal, which now needs regulatory approval before closing -- expected by the year end.

The deal faced a tough hurdle because, under Texas law, holders of at least two-thirds of the San Antonio-based company's shares had to vote in favor. Shareholders who failed to vote were counted as voting against the sale.

The initial $37.60 bid ran into some opposition last year. But some influential shareholders began supporting the deal after the bidders raised the price and offered the option to investors to take an ongoing stake in the company following the deal, known as "stub equity."

In addition, proxy advisory service Institutional Shareholder Services (ISS) reversed its opposition to the deal last week, citing in part lower valuations of radio station companies and a fall-off in leveraged buyouts amid turmoil in the debt markets, making it less likely such a deal could be struck again.

David Bank, RBC Capital Markets analyst, said the deal gave radio market leader Clear Channel, which has been struggling with other broadcasters amid an industrywide slowdown, an opportunity to try innovations without Wall Street pressures.

Despite an ever competitive market for listeners, Clear Channel's second quarter radio revenue rose about one percent to $918.4 million. Clear Channel has outperformed its peers, due in part to a move to cut advertising clutter and to promote shorter spots, analysts have said.

But some concerns remain about the deal, amid a troubled time for the markets. Stifel Nicolaus analyst Kit Spring cautioned there was still some uncertainty related to the Clear Channel deal.

"Just because the shareholders voted for it doesn't mean it's a done deal," said Spring. "I think it's likely to get done, but you just don't know. We've seen some changes in deals like Home Depot, where banks believed there was enough of a change in the financial or credit markets, that merited a lower price," he said. Home Depot Inc last month accepted a lower price for its supply unit instead of keeping the asset.

In an e-mail to employees after the vote result was announced, Clear Channel Chief Executive Mark Mays wrote that the company's next focus was getting the merger closed. The deal is awaiting regulatory approval from the Federal Communications Commission and the Department of Justice.

Those will "hopefully be granted in the next few months, putting the most likely merger completion date in December, although it could be somewhat before or after that timeframe," wrote Mays in the e-mail.

LENGTHY PROCESS

Mays said the takeover had been a "lengthy process."

The battle for Clear Channel had numerous twists since the company announced in October 2006 that it had hired Goldman Sachs Group Inc to help it evaluate strategic alternatives.

That provoked interest from a number of private equity players. In November, Bain and T.H. Lee beat out a rival consortium, including Providence Equity Partners, Blackstone Group and Kohlberg Kravis Roberts and Co, to buy Clear Channel for $37.60 a share.