After Deal Collapse, Radio Industry Wonders What's Next For Clear Channel

BAIN DRAIN

For Beleaguered Radio Industry, New Uncertainty





*** UPDATE BELOW ***


After over a year of anticipation, hundreds of layoffs and station sales, the deal to end all deals in the radio business has apparently collapsed in a spectacular manner.

While the reasons are still being sorted out, it appears the takeover of industry giant Clear Channel by Bain Capital and Thomas H Lee is a victim of the changing economic climate, as well as an increasingly- dark outlook for radio broadcasting outfits.

The company owns a number of major talk stations, including KFI/ Los Angeles, KFYI/ Phoenix, KOGO/ San Diego and KTRH/ Houston. Its syndication arm, Premiere Radio Networks, is by far the most successful distributor of talk programming nationwide.


Meanwhile, the lefty kooks who in December asserted across dozens of websites that Mitt Romney was using Bain to take control of Clear Channel's stations and push a right- wing political agenda look even more foolish today. Don't hold your breath waiting for retractions, however, they'd rather you forget the whole thing.

From the AP:

SAN ANTONIO (AP) -- Shares of Clear Channel Communications Inc. plummeted in late trading Tuesday, following a report that the media company's private buyout is on the brink of collapse.

Shares fell $1.89, or 5.5 percent, to end regular trading at $32.56, then fell more than 21 percent in after-hours trading to $25.60 -- far below the $39.20 per share the buyout firms promised shareholders.

The Wall Street Journal reported on its Web site Tuesday that the private equity firms leading the $19.5 billion buyout were having difficulty reaching terms with the banks committed to financing the deal. The report cited unnamed people familiar with the matter.

For the already- beleaguered radio industry, this is not good news, as Clear Channel (NYSE: CCU) was the only major radio operator holding on to most of its market capitalization while shares of its peers spent the year in a state of free- fall and have yet to recover. In fact, it remains one of the few not officially in penny- stock territory.

Already, remaining radio industry insiders wonder how the collapsed deal will affect them, even after hundreds were terminated in 2006 and 2007 in anticipation of the deal's closing. A large break- up fee is now on the table, which could bolster Clear Channel's bank account, but litigation seems far more likely in the short term.

Could the company look for a new buyer? Or might it break up into pieces, with individual stations fetching more than the firm could as a whole?

The least likely scenario for Clear Channel is to do nothing and watch its stock price fall by 80 to 90% over the next year or two, which has been the recent fate of almost all of its competitors. Status quo isn't going to save the firm, so what will it do?


UPDATE: The Independent inserts its liberal agenda into coverage of the story:

The Mays family grew to dominate the US radio market thanks to an acquisition spree in the wake of the 1996 deregulation of the industry, since when Clear Channel bought more than 70 companies. Its scale and market power has brought with it criticism, and most recently 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.

UPDATE: Clear Channel and the buyout partners aren't going down without a fight. Will the courts force these banks to see the deal through? Or, is all of this a mere negotiation tactic to hammer down final terms that all parties can accept?

FOR New England regional talk radio updates, see our other site.


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