Clear Channel Communications Inc.'s sale of TV and radio stations for a combined $1.5 billion may give more fodder to investors who oppose the proposed $26 billion privatization the company has been struggling to get approved.
Clear Channel said it had sold its 56 television stations to Providence Equity Partners Inc. for $1.2 billion, as well as 161 radio stations to a number of parties for $331 million. The company also said it planned to use a $1.5 billion tax carryforward, a credit earned when it spun off its entertainment business at a loss in 2005, to compensate for capital-gains taxes incurred on the sales.
Some investors have complained that it was difficult to evaluate Clear Channel's proposed sale to a private-equity group led by Thomas H. Lee Partners LP and Bain Capital Partners LLC because they didn't know what the value of these transactions would be; Clear Channel signaled its intention to sell the assets last year.
The TV stations carried a bigger price tag than many analysts had expected, giving ammunition to shareholders who say they should vote down the privatization and let the public-company shareholders reap the benefits of asset sales.
On the other hand, the value of Clear Channel's radio assets only became murkier. The company sold 161 of the 448 stations it is trying to unload for a price slightly lower than many analysts had expected. However, the company didn't say exactly which radio stations had been sold. Some analysts say they believe the sold stations were less-desirable properties.
In all, the transactions failed to provide a definitive reason for investors to believe that the bid from Thomas H. Lee and Bain -- which last week was raised to $39 a share from $37.60 a share -- is good enough. Shareholders are now set for a twice-delayed vote on the matter on May 8.
The private-equity groups argue that $39 a share is a good price, given that the company's stock price was trading well below $28 as recently as August. Many short-term investors agree and have jumped into the stock in recent months hoping for a quick gain. But many long-term holders say the stock is worth far more if the company takes various steps, including selling off assets.
Another piece investors hope to learn is the tax basis of the international outdoor business, which J.C. Decaux has said it is interested in buying. Knowing the tax basis would help investors figure out just how much Clear Channel would garner after taxes on a sale.