Thursday, February 14, 2008

Radio: Justice is served


No surprises.

As expected, Clear Channel cleared its last major regulatory hurdle yesterday.

The Department of Justice rubber stamped its approval of the $19.5 billion BainCapital/Thomas H. Lee private equity buyout of Clear Channel with only a few minor provisions.

They have to peddle a few stations scattered in the San Francisco, Houston, Cincinnati, and Vegas markets to muzzle the legal beagles.

Big deal. Every station in the Clear Channel cartel is up for sale – for the right price. The ongoing dilemma is that there’s the massive multi-million dollar discrepancy in what they’re asking for them and what they’re really worth.

Here’s the DOJ’s rationale: BainCapital and Thomas H. Lee have ownership stakes in non-Clear Channel radio properties in those markets. They have a piece of the life-supported Cumulus, which has Clear Channel-competing stations in Houston and Cincinnati. Lee also holds a chunk of Univision, the Spanish media chain, which has rival stations in San Francisco, Vegas, and Houston.

Univision was bought out in March 2006 to a consortium, headed by billionaire Ham Saban, which parted a piece to Lee.

That’s why FCC Chairman Boy Kevin Martin allowed Bain and Lee to keep a hold of their stake in both Cumulus and Univision provided they convert them to “non-attributable interests.” Translation: They have to keep their noses out of those companies’ management and withdraw their reps from their boards – but they’ll still be landlords.

Boy Kevin made those moves to insure easy passage through the halls of Justice.

And how did Wall Street react?

Clear Channel was down another nickel to 29.49.

Cumulus tanked. Down 51 to an unrespectable 5.78.

Cumulus struck an absurd go private deal with Merrill Lynch Global Private Equity. One problem, when the deal was cut, it was for 11.75 a share. Now there’s a 5.97 gap that’s wide and deep and the M-L dealmakers that drummed up this scheme are no longer with the company.

The moral of the story: Don’t write deals on cocktail napkins after the fourth martini.

Remember those M.C. Escher prints that were popular when you were in college? That’s Wall Street. Nothing is as it seems.

This deal carries the stink of a thousand poisoned dead rats in the New York subway tunnels.

Now, it’s all about signing off on a few dozen documents.

The $17.5 billion question is: Will Bain and Lee be successful in taking Clear Channel private? Let me rephrase that. Will they down the Mickey?

The $17.5 billion answer is a question: Who knows?

Logistically, the deal should be deleted – but as an anonymous contributor to this blog's comment section pointed out yesterday:

“I don’t think readers here understand Wall Street as well as they understand radio.

“This deal goes through because there are millions to be made on commissions. It’s that simple. To the investment banking community, the future of radio and Clear Channel is irrelevant. They are focused on closing this deal.

“Some of you guys have undoubtedly sold airtime. You know the drill. Close, close, close is the mantra when a deal reaches this point. And that’s for a small ad buy. Imagine you literally had millions in commissions hanging on the deal, for yourself and your bosses.

“If you had that kind of skin in the game, you’d be hyping radio, too. Go visit Greenwich, Connecticut and you’ll see street after street on mansions built on the commissions from exactly this type of stupidity.

“And as to why the people putting up the dough don't balk? Well, if you look at history you'll notice that being rich doesn't necessarily mean you're smart. This isn't exactly Warren Buffett putting up the money here.”

That says it all and says it best. Some will make out while others will be instructed to bend over and kiss their assets goodbye.

I have only two words - actually one name - to add: Chauncey Gardiner.

24 comments:

Anonymous said...

All this whining and no one willing to take a step? Talk is cheap. Write a letter. Take action. For shame.

"Justice Department Requires Divestitures in Private Equity Funds’ Acquisition of Clear Channel"

As required by the Tunney Act, the proposed settlement, along with the Department’s competitive impact statement, will be published in the Federal Register. Any person may submit written comments concerning the proposed settlement during a 60-day comment period to John R. Read, Chief, Litigation III Section, Antitrust Division, U.S. Department of Justice, 325 7th Street, N.W., Suite 300, Washington, D.C. 20530. At the conclusion of the 60-day comment period, the court may enter the final judgment upon a finding that it serves the public interest.

Jammin Boldy said...

I agree with the poster before me. We should do something. Here is the dilemma and this isn't for the sake of arguing or challenging because I'm behind you 100%. Can you site any challenges similar to this that an organized group was able to overturn during this administration? I think people have become apathetic because they feel everything is a lost cause.

talex said...

So you are saying that Bain and Lee collectively and/or separately also own pieces of other broadcast chains and the DOJ is just telling them not to be directly involved?

How is that enforced especially after Bain and Lee were caught doing prior control on Clear Channel in San Antonio (the famous John Hogan memo).

The message this sends out is that FCC and DOJ laws are options and nothing more.

louier said...

I agree the "money business" is a manipulative corrupt system. It's money for nothing - almost. You put together deals, take your cut and who cares what happens after that. Its in the same league as realtors. They make their commission and they don't care whether or not their clients can make the house payments. They got their check and everything else ends up being other people's problems.

Anonymous said...

I saw you speak a couple of years back on a radio panel. Almost everything you predicted has become true right down to Clear Channel going private. I also remember that you said there were five words that had the radio industry followed post-deregulation this disaster could have been averted: RESIST SOME OF THE GREED. Those words could and should apply to ANY business venture and any political decision.

Anonymous said...

Explain this to me, someone, please. The Bain/Lee - CC buyout will do serious damage to the banks involved. Correct? If then, that is the case, why is it that those working the deal to get it done so they can profit like a realtor have more juice and decision making than the banks whose $15.7 billion will be put in jeopardy at a time when lending institutions cannot afford any more bad news?

Tannis said...

Following the paper trail on this one is like trying to do so in a ticker tape parade. How many sided fence do these money people work with anyway? This is disgusting. Someone always profits while most will lose out. I pity anyone holding broadcast stock. This deal will bring everyone down.
It's already happening.

louisr said...

YOU CLOWN HEADS DESERVE THIS!!!!

Here's the weather forecast....
CLOUDY WITH TEMPS DROPPING.

Clear Channel
high - 75.01
2/6 - 29.02
YESTERDAY 1:00 PM 2/13 – 29.16
RIGHT NOW - 3:00 PM - 29.06. SMOKIN', BABY, SMOKIN'!!!!

Cumulus
high - 28.85
2/6 - 6.24
YESTERDAY 1:00 PM– 2/13 – 5.87
RIGHT NOW - 3:00 PM - 5.77
DROP BABY DROP!!!!!

Citadel
high - $87.96
2/6 - $ 1.43
YESTERDAY -1:00 PM 2/13 - 1.45
RIGHT NOW - 3:00 PM - 1.40
GOING DOWWWWWWWWWWWWWWWN?????

DEEEEEEEEEEEEE-VALUE, BABY, DEEEEEEEEEEEEEEEE-VALUE!

CUE UP AWB - PICK UP THE PIECES!!!!

Anonymous said...

like the way inside radio buries the cc/bain/lee/doj story & headlines its RAB. CC owns Katz. CC owns Inside Radio. CC will tell you what it wants to tell you where it wants to tell you.
Unfair and bias. You betcha.

Sue Anders said...

Is it me or is everyone laughing loudly at the Clear Channel - Bain Lee deal? It seems that all the media talk in my office is about Yahoo-Microsoft and Time-Warner spinning AOL. It's almost like...radio? What's that. There is a general disinterest as if Clear Channel and radio in general has already been written off as yesterday's papers. I still listen to radio but mostly just NPR and about half the time on Podcast.

Anonymous said...

Is it more expensive for Bain & Lee to back out of this questionable deal than it is to go through with it. It would seem to me that under the circumstances backing out of the deal would be lesser of two evils and maybe Bain & Lee could get out of the payoff if they could prove that CC was less than forthcoming with due dilligence.

dontgetmadgeteven said...

I always used to wonder who lived in those mansions. Now I know. The bastards that ruined my industry, my career, my friends and got paid handsomely for doing so. Payback is a bitch. That is all I can say.

Fabulon said...

The DOJ approval was supposed to give the stock a nice jump. What happened? Some of the radio web trades claimed after hours trading increased the price but when all was said and done here we find CCU going nowhere but down. If Bain Lee were smart they would renegotiate for 19.99 and even that is high considering CC could be there in a week

fastforwardr said...

Yikes! What if Clear Channel puts those stations up and no one bites? Then they have to lower the price, then CBS and Entercom and Greater Media have to lower their prices and pretty soon we could end up with affordable radio run by rational people. What a concept.

FU LAMEBRIAN said...

F U LAME ASS. U DONT KNOW SH!! U THINK U KNOW RADIO U KNOW NOTHING> ALL U R TRYING TO DO IS DIVALUE RADIO CAUSE UR NOT IN IT ANYMORE. FU FU FU FU U DONT KNOW SH!! U WATCH HOW FAST RADIO STOCK COMES BACK UP AS SOON AS THE FINANCAL CRISIS IS OVER. THE ONLY REASON RADIO STOCKS R DOWN IS CAUSE EVERYONE ELSE IS DOWN. U DUMB SH!! FU!!! U KNOW NOTHING ABOUT RADIO.

Crap Bull S#!t = CBS said...

That commentator (if that is the right word) that you quoted really did a great descrip of how the money is made. It made me ill because while they fiddle around with money I am out of work. It was nice they paid me severance that lasted for a year but the year is almost up and I have spent every day actively searching for work anywhere. I am in my mid forties. I was number one in my time slot (afternoon drive) and held that position in ten of eleven books. This is how they rewarded me. Thank you, Dan Mason. Talk about a lucky but good story. He was working for the eskimos at Cook-Inlit and got lucky when a chain of events found him in charge of programming at Infinity/CBS. I know some feel he is the second coming and knows what he is doing (like Del Calliano) but let me tell you. He is clueless and ruthless to his own people and like a pussycat around his peers. He will not last. He will not survive.

Danny Wright said...

Gorman, you and Sanders are pathetic. That is all I can say. Sanders is working in some factory making audio equipment and Gorman has done nothing of note since WMMS.

I have a far more successful career and track record than you two will ever have. I have been steadily employed and I don't have to resort to a blog to get attention.

You and Sanders did me a favor when you "demoted" me to all night and paid my afternoon drive salary.

You WMMS people are trying to make yourself into saints with Gorman's book which I refuse to read when it was your station that did all the dirty tricks in Cleveland radio.

I should feel sorry for you but I don't have the time. I'm too busy working.

Anonymous said...

I predict the CC-Bain/Lee deal will go through. There is too much at stake for it to self destruct now. The aftermath will be costly and deadly and that isn't a problem for those doing the deal. They will be on to the next p.e. deal and won't give a rat's patootie about what they did your career. Deregulation let them in.

Mister Moneybags said...

Clear Channel's Q4 earnings came out. I think they expected better. This is not good news. Clear Channel's October-December radio revenues down -3%. Revenue slipped $900 million from the Q4 2006 to $875 million Q4 2007. Revenue for all of 2007 flat at about $3.44 billion. Expenses for Q4 up 1% . Cash flow down 9%: $360 million to $330 million.

This is the dying company Bain/Lee wants to take private? Those banks are going to take one hell of a wallop.

Anonymous said...

'thought I'd check 'back' and see the responses. Spineless. As expected.

Instead of writing a letter or organizing a 'consolidated' front, all that happens is more sniping at each other.

Blogging. Talking to yourselves. Multiple screen names on multiple sites with the same whining few having conversations with themselves.
Isn't talking to yourself a sign of insanity?

Not an organizational skill in the bunch. Big voices with little (you fill in the blank.) Neither one works anymore, btw.

jammin boldly: history is full of precedents, but no guarantees.

talex: the answer is "yes."

louier: the keywords are: "follow the money."
The mortgage crisis isn't about a bunch of guys driving around in Cadillacs. It has to do with banks making big bucks (did I say follow the money?) and they'll get a bail out to boot.

anonymous 1: yep, greed is one of the 7 deadlies.

anonymous 2: wasting my words with on econ101, but: power brokers get richer, banks look poorer and get richer. everyone else picks up the tab.

tannis: see above. the traders will do fine. the poor shleps that have stock in their old employers will suffer.

louisr: sound bites won't pick up the pieces. cute, though.

anonymous: biased reporting? ubetcha. if that's our trusted news source, no wonder.

sue: everyone here is to blame. all talk. all the time. no action. anytime.

anonymous: trust me, lee & bain will make money.

dontgetmadgeteven: interesting name. so what's their payback? got a gun?

fabulon: they're smart. watch and learn.

fastforwardr: price adjustments. radical thought. did cutting the price of 8 tracks save them?

fu lamebrain: if you're still in the biz, that explains the decline.

crap bull s#!t: Mason will last, especially if you're right about him. ruthlessness wrapped in pussycat goes a long way.

danny: you're working because you're adaptable. you have the most to lose.
work=good. whine=bad.
if only the industry was adaptable.

anonymous: why should anyone care about YOUR career if you don't care enough to get off your own rat's a$$ and do something?

mister moneybags: the banks will be fine. the world economy can't afford to let them be otherwise and they know it. 30M is nothing. we'll just print more.

write a letter. call a legislator. BE HEARD.

Anonymous said...

For "fu lamebrain!" There's a Mensa Meeting this weekend somewhere near you! Be sure NOT to attend!

Anonymous said...

To anonymous 1. You are absolutely right about everything you say and request. Please understand that some of us have families, mortgages and are barely getting by on what we have. This government has successfully changed the system to control us by fear and I have to admit I am among those fearful of losing more than I already have.
I work for Clear Channel. I still have a job and need it. I am doing the job of what used to take six people-no exaggeration. I also have a wife, two children, a modest home, and two modest cars. I believe in what you say but if I send written comments to John Read how do I know that someone won't tip off John Hogan or Lisa Dollinger? Don't say it is paranoia because it has happened.
What we have to hope for is that there are enough non-radio people (radio fans not employees) reading Gorman's blog who have nothing to lose by making that contact. This is not a case of wimping out or being apolitical. This is just plain reality.

Anonymous said...

They should be fearing YOU. Get organized. I agree with anonymous 1. Bullies keep pushing until they are pushed back. If CC fired you for that you would have a case against them. Avery Friedman is an excellent lawyer for those cases.

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