Monday, February 4, 2008

Radio: Let's make a deal

It’s not a perfect world.

Is FCC Chairman Boy Kevin Martin about to pull off another scam for his buddies at Clear Channel, Cumulus, and their private equity partners BainCapital and Thomas H. Lee?

Let's follow the paper trail.

Last week, the FCC rubber stamped the $27.4 billion buyout of the number one radio chain Clear Channel Communications by Bain and Lee.

Lucky sperm clubbers Mark Mays and Randall Mays stay put and get to keep their seats on the modified company's 12-person board of directors.

Routine stuff.
The FCC made their usual strong but unenforceable suggestions that were heavy on the blah blah woof woof, light on the follow-through about selling surplus properties to women and minorities.
The approval was predicated on Bain and Lee’s divesting or converting their stakes in Cumulus Media Partners chain, a collaborative formed by Cumulus Media to acquire Susquehanna Radio.

Bain and Lee each have 25 percent of the privately-held company. They don’t have to sell their stake but will have to give up their right to appoint two members of the eight-member board of directors at Cumulus Media Partners.

Or so they claim.

There’s a black cloud over Cumulus’ go-private deal.

But now there are tittle-tattle circulating that the FCC will grant waivers to BainCapital and Thomas H. Lee. It’s one of the reasons Clear Channel stock was up in the rarified air of $31.77 on Friday.
Rumor or fact?

Boy Martin controls the FCC. That we know. We don’t know who’s controlling the Boy.

In addition to Sam Zell, that is.

Cumulus’ privatization deal with Merrill-Lynch was done for $11.75. On Friday, Cumulus closed at $6.59.
Considering Merrill-Lynch’s $8.6 billion hit combined with everyone connected with the Cumulus deal on the M-L end are no longer under their employ puts that deal in jeopardy.

One would think.

So is Boy Kevin, who never met a waiver he didn't push through, about to play the hardship card for Cumulus?

The Boy may be a lame duck at the FCC but, for now, it’s his party and no one’s standing in his way.
Let’s add the Boston-based Highfields Capital Management fit to the mix.

They were against the buyout of Clear Channel before they were for it.
Earlier this year, Highfields, which is Clear Channel's third-largest shareholder, opposed the proposed $18.7 billion buyout offer by Bain and Lee.
But April showers brought May flowers when Bain and Lee cut a deal with Highfields, giving its shareholders equal treatment in all dividends and other distributions, as well as representation by a minimum of two members on the board. Clear Channel’s board bought it and since then it’s been a cozy relationship between the two and Highfields just can't keep its hands off of Clear Channel.
Last week Highfields increased its holdings with Clear Channel from 6.4 to 7.7 percent, which has, at least for now, kept the buyout deal in life support.
It's true that a dead bird in the hand is worth more than a kick in tush.

A link to three hours of MTV from 1983 at


Anonymous said...

Kevin Martin has played the partisan card from his day one.

Anonymous said...

I can think of only one reason CCU was going private to begin with: Because like a wrecked car in a chop shop, the parts could be sold off for more money than the assembled whole was worth. I mean, it's not like they had new ideas about how to run the company more profitably. It’s the same management team! The problem is that in the lag time between the deal and the close, station values have been plummeting. So the underlying logic behind the deal is no longer there. They aren’t going to close on it just because of the breakup fee. The cost to consummate the deal will be much higher. Buyout price: $39.20 a share. Current price $31.20. Yikes!

Talex said...

I started to write my comment and realized anonymous 2 said it best. I was going to define radio especially Clear Channel and Cumulus as two companies that a parting themselves out as scrap metal. They are worth more in pieces than as a whole or so they believe. Reality shows a different story. The only line that counts is the bottom line and Clear CHannel and Cumulus have forgotten how to sell radio and more importantly why they sell radio. You cannot sell something with limited (or virtually no) content. When was the last time an executive from CC or Cumulus listened to their own stations? Is that what they leave up to McVay, Berkowicz and Jacobs to do? If that is the case than the Mays family was right to say they are just in the cash flow business. Only problem there is that there is no cash flowing because their content is not.

nad said...

Cumulus is taking a hit today. Citadel is heading in penny stock land.

You were right.

How soon before the fire sale begins? What market conditions will force that?

The Highfields deal is poor smoke and mirrors.

Anonymous said...

I want to know who makes out in this deal. I mean who really makes out? I don't see an upside here for anyone. There is no prize.

BTW thanks for the MTV link. It was nice lunch break entertainment today.

Anonymous said...

I feel sorry for anyone who still has radio stocks in their portfolio except for those who put radio in to the miserable shape it has become.

Anonymous said...

John, sorry about your Patriots. If there is any consolation - at least the Pats had a good long sucessful run unlike any of the radio chains today which can only show a downward trend and a penny stock prices.

madman said...

There has to be a reason for all this madness. Radio stations are not making money. The latest group to leave radio are car dealers who are moving their money elsewhere. If radio loses automotive it may as well close up shop. I agree with those leaving. What is there worth listening to on radio?

Louis said...

CC and Cumulus took a beating today. I hope no one expected anything otherwise.

Buster said...

Why does the FCC spend so much time going after foolish obscenity rules (Janet Jackson for one) and imposing strict rules on radio and TV while it gives away its licenses to operate to companies like Clear Channel and Tribune Corp. which clearly do not operate in the public interest.

G said...

Two quick comments: Martin does not control the FCC. He has frequently been unable to move things forward because he couldn't corral two more votes. Not saying the hardship ruling won't be made, but Martin alone can't swing it.

Two: Both CC and Cumulus are actively recruiting minority and women buyers from outside the traditional investor/purchaser pools for media properties. Their hope is that they can reach out to naive investors and snooker them into buying stations. A big part of the marketing is that they would never part with these broadcast gems if it wasn't for the mean old FCC, so I'm not so sure they'd want the FCC changing directions. lol

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