NEW YORK — In the latest and biggest of a recent wave of media buyouts, radio giant Clear Channel Communications Inc. agreed Thursday to be purchased by private-equity firms and the company's founding family for $18.7 billion.
The deal, which also involves the assumption of about $8 billion in debt, ranks as the fourth-biggest leveraged buyout in history. Nine of the top 10 have come this year, the only exception being Kohlberg Kravis Roberts & Co.'s $25.1-billion buyout of RJR Nabisco Inc. in 1988.
For The Record
Los Angeles Times Saturday November 18, 2006 Home Edition Main News Part A Page 2 National Desk 1 inches; 55 words Type of Material: Correction
Clear Channel deal: An article in Friday's Business section about the proposed buyout of Clear Channel Communications Inc. listed Warner Music Group among the companies that had been taken private this year. Warner Music was taken private in 2004 but has since returned to the public markets and trades on the New York Stock Exchange.
Traditional media companies have become targets for two reasons: Competition from the Internet has eaten away at their audiences and advertising revenue, causing their stocks to sink. Second, their shrinking but still-strong cash flow makes them able to shoulder the increased debt involved in a leveraged buyout offer.
Taking these companies private frees them from Wall Street's short-term mentality, conceivably enabling them to invest in projects that may not pay off for several years. Backers of these deals say they are perfect for the old-line media industry, which faces a tough and expensive transition to a digital world, even as it loses ears, eyeballs and advertising revenue to new rivals such as Google Inc.
The winning bid for Clear Channel of $37.60 a share came from the Boston-based firms Thomas H. Lee Partners and Bain Capital Partners. It topped an offer from Providence Equity Partners Inc., KKR and Blackstone Group.
Members of the Mays family, which founded Clear Channel and holds about 7% of the stock, will continue to manage the company, which owns 1,150 radio stations and one of the nation's largest outdoor-ad businesses. Patriarch L. Lowry Mays will step down as chairman and sell a portion of his stake, taking an advisory role as chairman emeritus. Sons Mark P. Mays, chief executive, and Randall Mays, president and chief financial officer, will remain in their posts.
San Antonio-based Clear Channel also announced separately that it would sell 448 radio stations and all 42 of its TV stations, which together accounted for less than 10% of revenue last year.
Clear Channel's shares rose $1.24 on Thursday to $35.36.
The deal closed less than a month after rumors of a sale began leaking. There has been some criticism of the process because the Mays family appeared determined to retain control rather than inviting a full-fledged auction.
