Clear Channel Board Rejects Revised Offer
May 4, 2007 at 5:45 AM (PT)
CLEAR CHANNEL COMMUNICATIONS said last night that its board had rejected a revised offer by two equity firms that had agreed to buy the company, but are now trying to keep the deal from falling through. THE NEW YORK TIMES reports the new offer was a last-ditch attempt to save the deal from being voted down by shareholders next week, but now means the buyout is almost certain to be rejected.
CLEAR CHANNEL said that the two firms, BAIN CAPITAL PARTNERS and THOMAS H. LEE PARTNERS, had proposed increasing their bid from $39 a share to $39.20 and allowing shareholders to own a stake once the company goes private. That would allow shareholders to participate in any profit from a sale or initial offering in several years. The buyout firms had offered shareholders up to 30% of the company after it became private.
...significant shareholders of the company have privately or publicly made known their opposition to the merger at $39 per share and their lack of interest in stub equity.
The proposal came just days after INSTITUTIONAL SHAREHOLDER SERVICES, the influential proxy advisory firm, recommended that shareholders reject the $39 a share bid, effectively killing the deal. Before making the latest proposal, BAIN and THOMAS H. LEE consulted HIGHFIELDS CAPITAL MANAGEMENT, one of CLEAR CHANNEL’s biggest shareholders that had planned to vote against the deal, according to people involved in the talks. HIGHFIELDS had agreed to vote in favor of the deal, these people said.
But CLEAR CHANNEL said last night that in determining to reject the proposal, "significant shareholders of the company have privately or publicly made known their opposition to the merger at $39 per share and their lack of interest in stub equity," referring to the stake that shareholders could have kept under the plan. Stub equity was recently introduced to shareholders in the UNITED STATES as a way to placate shareholders who had watched new owners of buyouts reap large profits by flipping the companies a few years later.
Under the terms of the latest proposal, the buyout firms would have financed the 20-cent-a-share increase by having the MAYS family receive $37.60 a share, which was the price the company had originally accepted last NOVEMBER before the buyout firms raised their offer to $39 a share in a failed attempt to appease shareholders.
The MAYS recused themselves in the vote over the new offer, CLEAR CHANNEL said. The shareholder vote is TUESDAY. Some investors are now expecting the company to pursue a recapitalization, and some shareholders could mount a proxy fight.