NEW YORK—Radio and outdoor advertising company Clear Channel Communications Inc. reports earnings for the first quarter on Friday. The following is a summary of key developments and analyst opinion related to the period.
OVERVIEW: Clear Channel was consumed during the first quarter by efforts to complete its stalled $19.5 billion buyout led by Thomas H. Lee Partners and Bain Capital.
The acquisition has been dogged by uncertainty since it was first announced at a lower price in November 2006. The per-share price was eventually boosted to $39.20 after several major shareholders balked. Most recently, Clear Channel and the buyout firms have accused six banks of failing to honor their commitments to finance the deal.
During the first quarter, the company and the equity firms filed lawsuits in Texas and New York to force the banks to fund the deal. The banks are Citigroup, Deutsche Bank AG, Morgan Stanley, Royal Bank of Scotland Group PLC, Credit Suisse Group and Wachovia.
The deal was originally expected to close by the end of 2007. In mid-December, the deadline was extended until June 12. In a sign of investors' pessimism, the stock traded has traded well below the buyout price so far this year.
BY THE NUMBERS: Analysts surveyed by Thomson Financial forecast fourth-quarter earnings of 21 cents per share on revenue of $1.53 billion.
ANALYST TAKE: Lehman Brothers analyst Anthony DiClemente noted that radio industry revenues have paced down every month since the company reached its amended buyout agreement in May 2007. DiClemente said Clear Channel's radio revenue has declined for the past two quarters and he expects a further decrease in 2008.
If the deal collapses, RBC Capital Markets analyst David Bank said Clear Channel could initiate a significant stock buyback plan or issue a significant special dividend. He said other options to unlock value could include sale of its international outdoor division.
WHAT'S AHEAD: Clear Channel's troubled buyout will continue to dominate the company's attention in the second quarter.
Also, Clear Channel is appealing a $66 million jury decision in favor of a company that accused it of improperly using patented technology that helps manage advertising revenue. Grantley Patent Holdings Ltd. sued Clear Channel in 2006, claiming a violation of four patents.
STOCK PERFORMANCE: Clear Channel shares fell about 15 percent during the period, closing at $29.22 on March 31. The stock hit a 52-week low of $25.90 on March 26, after media reports that the deal was falling apart.
