Tech Mediums

In light of the inability to close the buyout of Clear Channel by Thomas H Lee Partners and Bain Capital, I thought to finally talk about Clear Channel as a fascinating company and how much it reminds me Standard Oil, John D Rockefeller’s oil monopoly.

First things, first.  Standard Oil had a ridiculously enormous command over the oil market.  That’s why it was forced to break up into the BIGGEST names in oil you’ll have ever heard of.  I’ll list them, and note that some were merged with each other.

·        Exxon

·        Mobile (merged in 1999 from the union of Exxon)

·        Chevron (merged with Texaco in 2001)

·        Amoco (merged with British Petroleum in 1998)

Clear Channel isn’t quite the monopoly that Standard was (in some markets it didn’t own as many as 7 radio stations as in others :-D), but it’s got some of the same memorable names in the market place (btw – you could make the same case about GE, but GE is in such different industries that GE is more like a mutual fund).

·        Radio – where CCU had its origins; included in this are real estate holdings of radio towers: properties include the Steve Harvey Morning Show, Power 105.1 in NYC and Rush Limbaugh.

·        Live Nation (fka SFX) – one of the largest outdoor concert promoters.  Live Nation was spun out as a separate company and just did a deal w/ Jay-Z

·        Outdoor advertising (billboards) – through a purchase of Eller Media circa 1997

·        TV (local TV stations) which CCU announced it would sell in 2006 and completed in 2008

The Telecommunications Act of 1996 enhanced Clear Channel’s ability to acquire so many properties. 

 Nonetheless, radio is having a HARD time, since advertising is moving more and more online.  Clear Channel, Radio-One, Cumulus Media, all of them…revenues from radio have either not had meaning growth or are considerably down.  That’s why companies like Radio-One are figuring out their online strategy.

So the news of Clear Channel going private is probably one of the best decisions it can make given current trends – it can always reverse the decision and go public again, like a vasectomy J.  

An update to the saga of the leverage buyout of Clear Channel and it’s buyers, lead by Thomas H Lee Partners, LP, and Bain Capital LLC …

The buyers have concluded that their bankers are trying to back out.  Bankers have concluded that the buyers aren’t acting in good faith in negotiating the terms of the loan agreement.  Sounds a little like Hillary and Barak, eh?

 The Quicks:

The unclosed deal, reaching its two year anniversary on November 26, 2006, was valued at $26.7 billion (current estimates are about $19.5 billion), of which the banks agreed to finance up to $22 billion.  The offer price was $37.60/share in cash.  Clear Channel’s stock closed at 29.74 on April 22, 2008.

The bankers are a sextuplet including Wachovia, Citigroup, Deutsche Bank, Morgan Stanley, Credit Suisse, Royal Bank of Scotland.

Their concern is that there is a major credit crunch that’s making reselling of the loans to the secondary market extremely difficult (and difficult for many private equity deals).  The banks are skittish given the numerous write-downs that some have had…like Citi’s $18 billion write-down in the 4^th quarter of 2007.