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Clear Channel parties reach a buyout deal

The media giant, its acquirers and the banks they had sued agree to cut the price to $36 a share.

May 14, 2008|From the Associated Press

Clear Channel Communications Inc. said late Tuesday that it had resolved a legal dispute over its buyout, clearing the way for prospective buyers to take the radio and outdoor advertising company private.

Under the agreement, Clear Channel shareholders would get $36 a share, down from the earlier price of $39.20 a share. That reduces the deal's value to $17.9 billion from $19.5 billion.

The company, based in San Antonio, and its private equity buyers, Bain Capital and Thomas H. Lee Partners, had filed separate lawsuits against a consortium of six banks, accusing them of trying to undermine the deal by changing the terms.

A trial had been delayed from Monday to Tuesday as the parties continued talks to settle the dispute, which centered on whether the banks must fund promised loans for the takeover.

The amended buyout agreement still requires shareholder approval. Clear Channel said in a statement that it expected the deal to close by the end of the third quarter but that the parties had agreed to extend the deadline to Dec. 31.

The equity firms have been struggling to close the proposed deal as the credit markets have faltered and Clear Channel's share price has declined on fears that the transaction wouldn't close. A busted deal would have subjected the private equity firms to about $500 million in fees.

The banks had agreed to provide $22.1 billion in financing for fees of $400 million, but the suit alleged that the banks feared they would lose $2.7 billion after the market worsened.

The buyout of the nation's largest radio station operator and a global powerhouse in outdoor advertising has been tumultuous from the start.

The deal was announced initially in November 2006, but a group of holdout shareholders twice forced the equity partners to raise their offer and to allow some of them to continue owning a minority stake in the firm.

Delays in reaching financial terms and getting regulatory approval for the deal kept it pending as the credit markets seized up and banks, once eager to fund ever-bigger leveraged buyouts, got skittish.

As deadlines approached for the deal to be completed, the equity firms and Clear Channel accused the banks of trying to sink the buyout by changing the loan terms, a charge the banks have denied.

Lawsuits accusing Citigroup Inc., Morgan Stanley, Credit Suisse Group, Wachovia Corp., Deutsche Bank and Royal Bank of Scotland Group of "tortious interference" were filed in March.

On Tuesday, before the deal was disclosed, Clear Channel shares gained $1.43, or 4.4%, to close at $34.30.

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