Hedge Funds, Others Hurt By Sticking With Clear Channel
March 27, 2008 at 4:24 AM (PT)
HIGHFIELDS CAPITAL MANAGEMENT's 7.7% stake in CLEAR CHANNEL COMMUNICATIONS took a big hit WEDNESDAY, but HIGHFIELDS isn't the only big-name investor that stands to lose if the now- in-jeopardy $19.4 billion private equity buyout of CLEAR CHANNEL doesn't go through, reports CNN MONEY.
Among others, PERRY CAPITAL, ADAGE CAPITAL ADVISORS and THIRD POINT MANAGEMENT show up as holders of more than 3 million CLEAR CHANNEL shares as of the end of 2007, the most recent filings available from the Securities and Exchange Commission. Those funds either declined to comment for the record or couldn't be reached for comment.
The threat of a possible cancellation of the deal, a $39.50 a share bid by private equity firms THOMAS H. LEE PARTNERS LP and BAIN CAPITAL PARTNERS, sent CLEAR CHANNEL's stock to a five-year low WEDNESDAY. The market had already been skittish on the deal: CLEAR CHANNEL's stock was trading at a 13% discount to the offer price as recently as TUESDAY. On WEDNESDAY, the shares closed down $5.64, at $26.92 a share.
HIGHFIELDS is in a unique position: The BOSTON-based firm signed a deal last spring agreeing to vote its then-5% stake for the buyout and not sell any of its shares before last SEPTEMBER's shareholder vote, in exchange for a board seat after the buyout was completed. HIGHFIELDS has since added to its position, and owns 38.1 million shares of CLEAR CHANNEL.
"We bought CLEAR CHANNEL well before its proposed sale because we saw long-term potential value in the property," HIGHFIELDS Co-Founder JONATHON S. JACOBSON told DOW JONES NEWSWIRES. "That hasn't changed. If the banks are unwilling to close, we're confident that the company will still create substantial value by taking the steps they've been planning."
Several merger arbitrage and multi-strategy funds weren't so fortunate as to when they got into CLEAR CHANNEL's stock. Many got into or added to positions in CLEAR CHANNEL during the third and fourth quarters, when the stock traded in the mid- and high-$30s. Those included THIRD POINT, ADAGE and TACONIC CAPITAL ADVISORS. If those funds still hold the shares they held at the end of 2007, their losses are in the tens of millions.
The question now is whether hedge funds are fed up with CLEAR CHANNEL, or if they think the deal can still get done.