Clear Channel buyout plan draws lawsuits

mysanantonio.com
February, 2007

Clear Channel Communications Inc.’s buyout proposal may be one of the biggest in history, but several shareholders are saying it’s not good for them. So far, at least 10 complaints about the deal are pending in federal and Bexar County district courts.

The San Antonio-based media giant wants to merge with Boston-based Bain Capital Partners LLC and Thomas H. Lee Partners LP.

Clear Channel released this statement: “We believe this litigation is without merit. In fact, the Clear Channel board of directors conducted a full strategic review as well as a highly competitive and thorough public auction process involving multiple potential buyers before determining the merger agreement with THL Partners and Bain Capital maximizes value for all shareholders.”

Bain and Thomas H. Lee declined to comment.

Clear Channel announced in November that it would go private for $26.7 billion, including $8 billion in debt, or $37.60 a share.

“We believe that the shareholders aren’t being offered enough money for their shares,” said San Antonio attorney Marc Gravely, whose firm Gravely & Pearson is representing Pioneer Investments Germany. “We believe the market value is higher than the amount currently agreed to by Clear Channel.”

Equity analysts have released reports suggesting Clear Channel shares actually could fetch $40 or more. In November, one analyst suggested that shareholders reject Bain and Thomas H. Lee’s offer because the company’s assets could command a higher price if sold piece by piece.

One example of those assets’ value can be found in the company’s recent radio station sales, transactions separate from the proposed buyout.

So far, 76 of the 448 smaller-market radio stations Clear Channel plans to sell are under purchase agreements valued at more than $100 million, according to documents filed with the Federal Communications Commission.

Fidelity Management & Research, Clear Channel’s largest institutional shareholder, has said it would vote against the deal. The mutual-fund company says the price doesn’t reflect the company’s true value.

Much of the opposition to the merger surrounds the rising value of the billboard company Clear Channel Outdoor Holdings Inc., which is 90 percent owned by Clear Channel Communications.

“The price is not adequate at this time,” said New York attorney Gregory Nespole, whose firm has been named as one of two interim class counsels for a consolidated shareholder suit. The suit hasn’t yet been granted class-action status.

Court documents also allege Clear Channel didn’t give other potential investors enough time to make offers and is withholding information.

“The disclosures in the proxy statements being sent to all the shareholders is inadequate,” said Roger Mandel, a Dallas-based attorney whose firm, Stanley, Mandel & Iola, is also leading the consolidated shareholder suit.

Mandel said attorneys will seek to keep Clear Channel’s privatization proposal from going before shareholders for a vote March 21.

Clear Channel isn’t the only company that has faced shareholder resistance recently.

A Delaware court ruled this week that Caremark Rx Inc. would have to postpone a shareholder meeting to vote on its merger proposal with CVS Corp. because shareholders are seeking more information.

The Alaska Laborers Employers Retirement Fund, the City of St. Clair Shores Police & Fire Retirement System, Pioneer Investments, DD Equity Partners LLC and Levy Investments Ltd. are among those that have filed suit against Clear Channel, its board of directors, Bain and Thomas H. Lee.