Clear Channel Shares Down As Buyout Fears Intensify >CCU

Jan.28, 2008 in Market Outlook

Last Update: 1/28/2008 12:54:47 PM

By Shira Ovide
Of DOW JONES NEWSWIRES

NEW YORK (Dow Jones)–The apparent demise of Alliance Data Systems Corp.’s (ADS)
buyout is sparking renewed fears about the sale of Clear Channel Communications
Inc. (CCU), sending that company’s stock as much as 28% below the value of the
deal.

Shares of Clear Channel recently changed hands at $31.14, down 7.9% for the day
and well off the sale price of $39.20 a share. Earlier Monday, the stock price
was as low as $30.71, near a 52-week low set last week.

Several factors are contributing to fears about the $19.5 billion Clear Channel
sale, which has been in the works for more than a year. The deal has been dogged
by regulatory delays, worsening industry conditions and credit jitters that
threaten debt-rich sales like Clear Channel’s.

There remain many who believe the jitters are overblown, but Clear Channel’s
stock price reflects pessimism the deal will go through as planned.

The most recent worry is the apparent demise of Alliance Data’s sale, adding to a
roster of failed deals for SLM Corp. (SLM) and United Rentals Inc. (URI). Just
weeks ago, Alliance Data said the deal was going through as planned.

“You can understand people’s concerns” about Clear Channel, said RBC Capital
analyst David Bank, pointing to failed buyouts and a downturn in the radio
industry, which has caused Clear Channel to start a belt-tightening campaign.

Still, Bank said, “all signals seem to point to more likelihood than not that
they’ll follow through with their commitments.”

Clear Channel and its buyers lately have sought to soothe investor nerves. The
company reiterated as recently as last week that the deal is expected to close in
the current quarter. Scott Sperling, co-president of Thomas H. Lee Partners, also
said last week that the firm expects banks to finance the deal, according to
Bloomberg News. Thomas H. Lee is part of the group buying Clear Channel.

Clear Channel declined to comment Monday beyond its statement last week.

Also potentially weighing on deal confidence is a report Clear Channel is calling
for a tight leash on spending as revenue is falling short of expectations.

Trade publication Radio Business Report quoted a Friday email from John Hogan,
chief executive of Clear Channel’s radio division, who told managers to curtail
spending for research, promotions and discretionary expenses like travel for the
first quarter and to limit new hires.

Hogan said budgeted expenses for the first quarter are up 4%.

The radio industry has been in a slump, and early indications are business
conditions in the current quarter may worsen, prompting the missive from Hogan.

“No one anticipated how challenging Q1 would be for us,” Hogan wrote, according
to Radio Business Report. “We are operating in a different environment and thus
need an adjustment to our plan.”

The deal has faced rough sailing almost from the beginning. In November 2006,
Clear Channel announced the sale to private equity firms Thomas H. Lee and Bain
Capital. Within months, key Clear Channel investors had called the deal price too
stingy and forced through several sweeteners to deal terms.

Adding to worries, the sale of Clear Channel also has been beset by regulatory
delays. The deal close was pushed back as backers sought approval from the
Federal Communications Commission, which formally came last week. The deal is
awaiting clearance from the U.S. Department of Justice.

-By Shira Ovide, Dow Jones Newswires; 201-938-5287; shira.ovide@dowjones.com

(END) Dow Jones Newswires

January 28, 2008 12:54 ET (17:54 GMT)

Did you like this? If so, please bookmark it,