Clear Channel Communications, the biggest radio broadcaster in the US, is being taken over in a $26.7bn (£14.1bn) deal that ranks among the biggest private equity acquisitions of all time.
Lowry Mays, who founded the company with the purchase of one San Antonio radio licence in 1972, and his sons, Mark and Randall, stand to net $1.3bn. They will continue to run the company in the private arena, shutting the microphone on 22 years as a publicly traded company.
A consortium led by Bain Capital and Thomas H Lee emerged triumphant yesterday from an auction of the company, which owns 1,150 radio stations and 42 television stations. The deal was priced at a 10 per cent premium to Wednesday's share price, reflecting intense competition from a consortium led by Kohlberg Kravis Roberts and Blackstone Group. The deal, which values the equity at $19bn, includes about $8bn in debt.
Private equity firms are flush with cash from institutional investors searching for the above-average returns that the industry has enjoyed in recent years. Booming stock markets are also allowing companies to cash in previous investments. Big buy-out firms are also increasingly willing to club together to bid for multi-billion dollar companies. In just the past three months, the UK airports operator BAA and the US hospitals group HCA have agreed to go private in deals worth $21.8bn and $21.2bn.
David Bank, an analyst at RBC Capital Markets, said Clear Channel was selling for a compelling price. "The only thing that can be a concern is that Thomas Lee is involved in a lot of other media properties, so closing could take longer than expected. I can't imagine that they didn't vet this with regulators though."
Clear Channel grew to dominate the US radio market thanks to an acquisition spree in the wake of the 1996 deregulation of the radio industry, since when it has purchased more than 70 companies. Its scale and market power has brought with it criticism, and the company has been fighting accusations of pursuing a right-wing agenda. It syndicates the right-wing shock jock Rush Limbaugh and some of its stations banned Madonna and Dixie Chicks records after they made anti-war comments.
As part of yesterday's deal, the Mays family agreed to reduce the incentive scheme payments they could have received from a change in control. Lowry Mays stood to receive more than $23m. Mark and Randall - who will be joint chief executives under the new owners - each stood to receive $14m. All three will reinvest some of the windfall from their shares in the new consortium.
Clear Channel also announced plans to sell about 40 per cent of its smaller radio stations, to concentrate on those in the biggest US markets. It is also putting its 42 local television stations up for sale. And yesterday, there was speculation that the new owners may also wish to sell Clear Channel's controlling stake in Clear Channel Outdoor Holdings, the billboard advertising giant which it spun off last year.
Jean-Charles Decaux, the founder and chairman of the French outdoor advertising rival JC Decaux, said he had already approached the private equity consortium to signal his interest. "It won't be a cheap deal," M. Decaux said during an investor conference hosted by Morgan Stanley. "But we think we are quite a natural buyer for most of the assets, if they are for sale. This is a deal that makes a lot of sense from a strategic viewpoint."
JC Decaux is the world's second-largest outdoor advertising company, with about a 10 per cent market share behind Clear Channel's 12 per cent. The combined market capitalisations of the two companies is about $15bn - of which, JC Decaux accounts for $6.2bn - and their combined sales would be about $5bn.
Ruling the waves
* The number one radio station owner in US, with 1,150 stations, it also owns and operates 42 TV stations.
* The company hit the headlines during the invasion of Iraq when one of its stations banned the Dixie Chicks from its playlist.
* It controls Clear Channel Outdoor Holdings, the billboard giant, that is the number one outdoor advertiser in the UK
* Founded by an investment banker, Lowry Mays, and "Red" McCombs with the purchase of a radio station in San Antonio in 1972. Mays, an investment banker, brought in McCombs, a local car dealer, when the buyers he'd lined up for the station backed out of the deal.
* Went public in 1984, having gained a reputation for buying up and turning around local stations in the US.
* The chairman and founder, Lowry Mays, controls more than 5 per cent of the company
* In 2000, bought out rival AMFM for $24bn (£15bn), and SFX Entertainment, the events promoter, for $4bn.
* It spun off its entertainment businesses - which also include a stake in Mean Fiddler, the UK promoter involved in Reading and Glastonbury festivals - at the end of last year. This listed as Live Nation on the New York Stock Exchange. Randall Mays, Lowry's son and vice president of Clear Channel, is Live Nation's chairman.Reuse content