NEW YORK — After a speedy auction, Clear Channel Communications is selling itself to Thomas H. Lee and Bain Capital in a deal worth $26.7 billion in cash, or $37.60 a share — one of the largest-ever leveraged buyouts.
The radio and outdoor advertising giant also announced plans to unload its 42 television stations, as well as 448 smaller-market radio stations. The big deal is not contingent on those moves.
The TV broadcast biz accounts for about 10% of Clear Channel’s revenue and includes ABC, CBS, Fox, CW and Telemundo affiliates. Dotted across the U.S., markets include Albany, N.Y.; Bakersfield; Memphis, Tenn.; Salt Lake City; Jacksonville, Fla.; Little Rock, Ark.; Tulsa, Okla.; Wichita, Kan.; and Clear Channel’s hometown of San Antonio.
Clear Channel owns 1,150 radio stations. The move to divest smaller- market properties echoes a drive by CBS, where CEO Leslie Moonves is in the process of selling dozens of them to focus on more lucrative large markets.
The sale is the latest to see deep-pocketed private equity firms plunging ever deeper into media. A group of them recently agreed to acquire Univision Communications.
Thomas H. Lee and Bain are partners in Warner Music. Thomas H. Lee’s holdings also include VNU ProSiebenSat1 in Germany and Houghton Mifflin. Bain is a partner in AMC Entertainment.
Also Thursday, firms led by Ripplewood Holdings agreed to acquire Reader’s Digest for $2.4 billion.
Private equity is a big reason merger activity has swelled to $3.69 trillion this year so far — vs. $2.7 trillion last year, according to stats just released by Thomson Financial.
Clear Channel said its sale agreement — which includes the assumption of $8 billion in debt — lets it solicit competing bids through Dec. 7 and negotiate with other parties through Jan 5. But Wall Streeters discounted the possibility of a rival offer since a newcomer would have to pay a hefty breakup fee.
Clear Channel shares jumped 3.36% Thursday to close at $35.36.
Most think the price on the table is pretty healthy, although some still believe the company could fetch more if it were split up and sold in pieces.
Clear Channel management put the company up for sale believing the ho-hum stock price didn’t reflect the true value of the company. The bidding came down to two groups of private equity firms, with initial offers of around $36 a share.
Chairman Lowry Mays, who founded the company more than 30 years ago, will continue to run it along with his sons, CEO Mark and president and chief financial officer Randall. The family owns 7% of Clear Channel. All three will put a portion of their equity stakes into the deal — meaning they’ll continue to own a chunk of the company in partnership with private equity firms.
The Mayses, who are on the board, recused themselves from the vote to approve the deal but did participate in discussions. At the request of disinterested directors who approved the fairness of the transaction, the Mayses agreed to significantly reduce payments that would be due upon a change in control.
The announcement didn’t discuss Clear Channel Outdoor, which is a separately publicly traded company that is 90% owned by Clear Channel Communications.
That business is experiencing a renaissance and some Wall Streeters speculated it may be a reason that Clear Channel fetched a relatively rich price.
The deal requires shareholder and regulatory approval.