Thursday, May 15, 2008

Radio: Clear Channel - Business as usual?

Abhorrence gave way to logic when the parties caught up in the Clear Channel-BainCapital-Thomas H. Lee buyout realized that only the lawyers and vultures would get rich and its stock would eventually slide into spare change territory if this deal continued to get dragged through the courts. Sure, Texas justice might’ve prevailed – but at what cost to Clear Channel? Lately, the Mays family called in enough chits to owe some significant payback.

$39.20 was obscene. $36 is only slightly less obscene.

According to Heidi N. Moore’s Wall Street Journal blog: “At one point, the hatred between the parties was so intense that the emotion was palpable. “The companies and lenders hated each other so intensely that if it were in person, we would have needed an armed guard,” quipped one person close to the situation. And the developments since — with a settlement reached and a new deal well on the way — show the power of what can happen in a negotiation when the people involved decide to step back, tamp down the egos a bit, and take a more clinical look at the problem of the financing. “We had to wipe away the emotional issues and come to a pain-sharing agreement,” said one person involved”.

Forget the propaganda. This deal’s not done. There are strings attached.

This is one of those be-careful-what-you-wish-for situations.

Clear Channel shareholders still have to be sold. The new drop dead date for the deal is December 31, 2008. The stock could do some amazing feats of daring and disaster between now and then.

The banks involved in the deal have a mere 13 days (hear that tick-tick-tick?) to fund the escrow piece of the new privatization sale $36 a share agreement or find themselves at the mercy of New York Judge Helen Freedman’s court.

And don’t underestimate the greed of the investors.

If for some odd chance Clear Channel’s stock remains in its current inflated $36 price, expect its investors, most notably Highfields Capital, to demand it to be goosed back to the $39.20.

If reality sets in and the stock price tumbles, the banks could threaten to turn off the tap and it’ll be back to the fun and games we’ve grown familiar with over the past few months.
Like arbitrageurs, banditos are lurking all over this deal of the damned.

Regardless, those on the losing end in this deal will be the company’s managers whose piece of the action will be trimmed down considerably and, of course, the Clear Channel rank and file. More positions will be deleted or busted down to part-time/no benefits. I'm sure, like Marie Antoinette, the Mays family feels your pain.

“For all of us at Clear Channel, it’s still business as usual,” sayeth CEO Mark Mays, who’s been resurrected from the dead, revived and refreshed and ready for your obsessive-compulsive enjoyment, “As our merger transaction developments move forward, we’ll all continue to stay focused on doing our jobs — and creating value for our customers, serving our communities and growing our businesses.”

Business as usual? That’s what got you into trouble in the first place.


Anonymous said...

you mean to tell me that after spending all that money and calling in all those favors this deal could still fall apart?

of course as you say what ever happens those that work for clear channel through the thick and thin are now more expendible than ever.

wonderful company, beautiful deal.

Anonymous said...

Did Judge Helen Freedman preside over another Clear Channel case a few years back when CC was actively involved in backing broadway shows?

If that is the case why didn't she recuse herself from this one?

ex-cc said...

I believe that Mark Mays is so far removed from his day to day that he doesn't even have a clue as to how bad conditions are at his properties. Every station is a line item and nothing more. Talent be damned. Promotion and marketing be damned. To quote a song lyric..that's why he will not survive.

Anonymous said...

Business as usual, huh? They hate the name and wonder why everyone calls them Cheap Channel. They deserve it. Just like the Mays family and Randy Michaels deserved each other.

Anonymous said...

The thing that the WSJ fails to mention is that part of the reason this deal closed is that everyone involved was able to make a lot of money while the agitation and angst pushed the stock price around. I made 30% in one month, and I don’t have an insider’s edge on the trading. But I can tell you what’s happening today and has been happening.

Today, for those who care, is the day that the May options expire for CCU.

If you were a conservative investor like me, you bought options with a strike price of $32.50 in the $1.80 range a month ago and sold off in the $2.40 range yesterday and today. For an armchair investor like me, that’s a sweet return. But it’s peanuts compared to what the big boys, with their sophisticated trading programs, managed to extract from that same play, and that’s only the tip of the iceberg. Can anyone imagine how you could offset a 9% drop in Clear Channel’s sales price with the opportunities in the options market?

Can you imagine, for example, how you could literally write an unlimited number of options promising to sell shares at $37.50 if you knew the new deal was going to come in at $36 a share? Can you imagine how you could literally write an unlimited number of options to buy shares at $27.50, $30 and $32.50? You would know that these options would never be exercised?

Today, the action appears to be aimed at keeping the $35 options out of the money or only in the money by a penny or two. The moral of the story is this. Those with a passion and love for radio should invest those precious commodities into something else. The radio industry, and in fact any business that is owned by a publicly traded company, is just a share price. Nothing more.

Anonymous said...

To last comment. I agree with everything you say although I share a belief with others that the bottom will fall with radio this year for just that reason. Those that own radio chains do not know how to run them. Radio people do and I think as Clear Channel and others begin to divest we will see owner/operators that understand radio and how to make money from it. It takes more than a Prophet/voice-track, corporate playlist, syndication and no localism.

Anonymous said...

When Bain Capital and Thomas H. Lee showed up at Clear Channel in San Antonio to teach John Hogan how to write an effective memo and review the operations we heard back then that if this deal went through there would be still another round of cutbacks and having a salary cap on all jocks. Here we go again.

Anonymous said...

It is a case of getting what you wished for. Clear Channel has the knack for doing that through its connections but when it gets what it wants it never is exactly what they thought it would be. All that drama and the deal could still fall apart. Brilliant, Mr. Mays

Anonymous said...

So nothing has anything to do with reality and there are those that get paid based on the level of other people's misery. No wonder radio has changed. Wall Street mutated it into a cow they milked dry.

Anonymous said...

Remember that it was that rat bastard Randy Michaels who conned the Mays family into this mess in the first place. Lowry was a smart businessman until he got snookered by Zell who sold Michaels as the guy to run the company which he did into the ground. The Mays family will still clean up no matter what happens. Everyone else at CC will get conned.

Anonymous said...

I assumed Randy and company ran CC after the Jacor deal because Mays thought it would be cheaper than buying out their contracts. Ha ha ha.

As for CC trying to play up their outdoor business, I see a hell of a lot of billboards around my neck of the woods advertising their radio stations. I figure that's all unsold inventory.

Anonymous said...

There are those that made money on this deal already and those who will continue to make money on this deal no matter where it goes. Come to think of it. The only ones getting 'screwed' in this deal will be the employees that keep these stations on the air and their billboards up in lights.

Anonymous said...

(tick-tick-tick) I wonder how the passage of time enters into all of this? What are peoples' real intentions? There are a lot of people playing this one close to the vest as, quarter-by-quarter, radio revenues fall..5% here, 2% there, 6% there..(tick-tick-tick).

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