Wednesday, January 30, 2008

Radio: Clear Channel weather - Yesterday - 29 and change


The $17.1 billion acquisition of Harrah’s Entertainment by TPG and Apollo Globe – done.

Alliance Data Systems and Blackstone – undone. SLM, Harmon, United Rentals – un-done.

There’s no assurance of private equity deals reaching closure.

So what soured the Clear Channel buyout deal, you ask?

Where would you like to begin?
*
Cash, where is thy flow?

There’s nothing left over to cut from the operating budget. They’ve done everything but turn the oxygen off.

The competitive advantages Clear Channel touted to Bain/Lee weren’t real – not even close.

The Premiere syndicated division is over-rated. Rush, Dr. Laura, Delilah – they’re all long in the tooth. What can you say about Whoopi’s morning show other than “whoops?”

Clear Channel closed at $29.17 yesterday. And you thought Monday’s $31.42 was bad?

What’s the spread? The Bain/Lee buyout price was $39.20. Now, Clear Channel’s stock value is a sawbuck short.

These aren’t times of risk-taking – and taking on a critically problematical and devalued company like Clear Channel is an imprudent risk.

When number one son Mark Mays, announced the Bain/Lee LBO deal, he told Business Week on November 16, 2006, “ We're ecstatic (about the deal), and it's a great price for our existing shareholders. The buyers have a long-term horizon and are excited about the business and the great cash flow."

Take away the smoke and mirrors and it’s clear that Clear Channel didn’t know how to run radio nor did they hold on to people in that knew how to. It became a second tier micromanaged company.

They played the Wall Street game of stock purchases, dividends, and occasionally selling off cosmetic assets. When the well ran dry they suckered in Bain/Lee.

And what of Clear Channel’s employees and management? They made crap for cash. Their achievements were barely noticed. Clear Channel’s idea of encouragement was to not fire you.

Did you hear the buzz about what happened after that private equity conference ended in New York Yesterday? You’ll love this.

You’re Anthony J. DiNovi, co-president of Thomas H. Lee.

You’re cornered and asked about the probability of the $19.5 billion Clear Channel buyout reaching completion.

Your answer, please?

“No comment.”

Clear Channel criticized David Faber for referencing the quote on CNBC.

DiNovi told Dow Jones that no one should read anything into his “no comment” quote.

Wink, wink, nudge, nudge.

A few days earlier another Lee spokesperson, Scott Sperling, told Bloomberg News that he believed the deal would get done and remained confident the banks would honor their financing commitments.

What a difference a sawbuck makes.

Thomas H. Lee is only half of the Clear Channel deal.

What did a rep from BainCapital say yesterday when asked the same question?

The same answer: “No comment.”

Question - What are the three words that strike terror into the black hearts at the San Antonio Clear Channel headquarters?

Answer - Material adverse conditions.

One of two things will happen. The deal dies or gets reworked with the original prices slashed.

Both parties will end up calling the final outcome a "positive solution," but that'll be more from lawyer fatigue than anything else.

Either way – this deal’s heading south on a hell bound train.

23 comments:

Judge Judy said...

Bain/Lee are running the show here. What will be worse for Mark Mays and John Hogan? For the deal to go dead or a cut-rate deal and having to answer to Bain/Lee. Maybe that would be real justice. Having the Mays family and Hogan answer to Bain/Lee.

ex-CC & proud of it said...

No comment from both Bain and Lee? That does not fare well. I can't wait to see Mark Mays in the barber's chair. It won't be a haircut. It will be a scalping. It couldn't happen to a nicer group of con artists.

another ex-CCer said...

This is on the Dow now. Just thought you would like to know:

NEW YORK -(Dow Jones)- Bain Capital managing director Steve Pagliuca sidestepped questions Wednesday about the firm's buyout involving Clear Channel Communications Inc. (CCU), further disappointing investors who want assurances the troubled buyout will close as is.

Bain Capital and Thomas H. Lee Partners are leading the $19.5 billion buyout, which has come under question as the radio industry sags and as other debt-rich deals collapse.

On the sidelines of a private-equity conference, Pagliuca declined to address questions on Clear Channel from a scrum of nervous investors looking for any assurances they can get about the deal. The firm indicated it doesn't talk about public companies.

Pagliuca's non-remarks came a day after a top executive from THL Partners also declined to talk about the Clear Channel deal. That spooked investors, particularly after another THL Partners executive offered soothing words on the Clear Channel deal just a week before.

Worries about the sale are reflected in Clear Channel's stock price, which is trading well off the buyout price of $39.20. Clear Channel recently traded at $ 29.62, up 45 cents.

The question now for investors is whether Clear Channel is the next Harrah's Entertainment Inc. (HET), whose buyout recently closed in the face of deep market skepticism, or the next Alliance Data Systems Corp. (ADS), whose sale appears dead after Blackstone Group LP (BX) cited regulatory problems in seeking to walk away from the deal.

Clear Channel reiterated Tuesday that it expects the sale to be completed in the first quarter.

Pagliuca appeared at the conference in Manhattan hosted by News Corp. (NWS, NWSA), which publishes this newswire.

former EVP waiting patiently said...

Love your photo of the Wall Street bull's rear end. Clear Channel spent the past ten years telling its listeners, clients and its own employees to kiss their ass. Now it's the Mays family doing their eleventh hour ass kiss to save the Bain and Lee deal. Like most in this business that sold broadcast stock at the right time, I cannot wait to see this playout and values come down to more realistic multiples. Maybe then we can pick up the pieces and rehire and hire creative innovative people to turn the fortunes of the radio business around.

Anonymous said...

The other radio chains are doing everything they can to support the CC LBO. If CC falls (and Cumulus, too) everyone from Radio One to Greater Media to Entercom will see their properties devalued too.

Anonymous said...

The banks have a say in the Bain/Lee p.e. deal since it is their money that covers the $500,000,000 back out/break up fee. It is in their best interest to see this through but only if BainCapital and Thomas Lee can bring the price down. If they can't the banks could take a huge hit and it is soemthing they don't need right now.

Anonymous said...

YOU DO NOTHING FOR BROADCASTERS BY SUPPORTING A DEVALUED RADIO INDUSTRY. YOU MAY THINK THAT A STATION WORTH LESS CAN BE RUN BETTER AND WITH A LARGER BUDGET. THAT SHOWS HOW FULL OF IT YOU ARE. NO MATTER WHAT THE RATIO BETWEEN SALES PRICE AND MONEYS SPENT WILL REMAIN THE SAME. YOU DON'T KNOW WHAT YOU ARE TALKING ABOUT AND OVERREACTING TO THE CURRENT MARKET. RADIO IS UNDERVALUED!!!!! YOUR PROPAGANDA DOES NOTHING BUT MISLEAD.

talex said...

Did anyone ever ask why John Hogan would have blanket memoed so many managers and underlings with that dumb e-mail? Light weight. His mistake is to believe that no one at CC would leak it to you and others? This is one messed up company. How did BainCapital ever get talked into working with these scavengers anyway?

talex said...

Did anyone ever ask why John Hogan would have blanket memoed so many managers and underlings with that dumb e-mail? Light weight. His mistake is to believe that no one at CC would leak it to you and others? This is one messed up company. How did BainCapital ever get talked into working with these scavengers anyway?

talex said...

Did anyone ever ask why John Hogan would have blanket memoed so many managers and underlings with that dumb e-mail? Light weight. His mistake is to believe that no one at CC would leak it to you and others? This is one messed up company. How did BainCapital ever get talked into working with these scavengers anyway?

Anonymous said...

Love it. Blame Farber for reporting the Thomas H. Lee guy's quote! These CCU guys are clueless.

Anonymous said...

So Gorman what are u gonna do when the deal gets aproved & on CC terms? U dont know what u r writing about. F U.

Perplexed in Pittsburgh said...

Do they equate a hiring freeze with a ratings freeze which leads to a revenue freeze? So far CC has done everything the opposite of what they should be doing to generate business and ratings. Do they realize that by cutting out all external marketing and advertising the message said is that they are not worth advertising on at any price and I am being told that it is more important to get new business on the books than it is to get a decent rate?

Anonymous said...

Not only do I love your blog but I got the Savoy Brown reference, too. Hellbound Train. Great album. I bet there isn't a single CC classic rock staton that even knows Savoy Brown.

Keep up the good work. These guys deserve their disaster.

Anonymous said...

Not only do I love your blog but I got the Savoy Brown reference, too. Hellbound Train. Great album. I bet there isn't a single CC classic rock staton that even knows Savoy Brown.

Keep up the good work. These guys deserve their disaster.

Ggood said...

I'd love to see the deal collapse, but there's one big thing keeping it moving forward: MONEY!

All along the chain in a deal like this, there's a ton of people who don't get paid (or at least get a lot less) if the deal doesn't close.

I can guarantee you that those people are moving heaven and earth right now to make this thing work. Personally, I'm going to price some options on this dog. Because my one rule when investing in old media stocks is to figure out the stupidest outcome, and invest accordingly.

fastforwardr said...

29.04 - what more need be said?

A bad deal is a bad deal is a bad deal and this was a bad bad deal.

Randy Bachman said...

The 2008 version of the Guess Who's "Clear Channel's come undone"

CC's come undun
CC didn't know what she was headed for
And when I found what CC was headed for
It was too late

CC come undun
CC found a deal that was far too high
And when she found out CC wouldn't fly
It was too late

It's too late
CC's gone too far
CC's is all done

CC's come undun
CC wanted lies but all she got was reality
Came the time to realize
And it was too late

CC's come undun
CC didn't know what she was headed for
And when I found what CC was headed for
Markie, it was too late

It's too late
CC's gone too low.
CC's lost the sum.
CC's come undun

Too many stations, with not enough managers to run
Too many formats and not enough programmers
Too much time and not enough clients to fill
Too many lies to tell and not enough time

It's too late
CC's gone too far
CC's lost the sun

Anonymous said...

John, I love the folks who think you don't know what you're talking about. These are the same people who still believe we'll find WMD's in Iraq. LOL

Anonymous said...

Guess who gets the $500 million breakup fee? Clear Channel. Sounds pretty smart to me

Anonymous said...

If Bain Capital and Thomas Lee can contest the conditions of the breakup fee, they could possibly avoid having to pay it.

Anonymous said...

This ex-employee says: CC, please die already!

BWHAHAHAHAHAHA!!!!! LMAO!

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