Big investor sticks with Clear Channel


Shares of CC Media Holdings are now worth only a tiny fraction of the $36 per share that sellers got for cashing out of Clear Channel Communications, but Highfields Capital is holding onto its position as the largest shareholder outside of Bain Capital and Thomas H. Lee Partners. It still holds nearly 10 million shares.

We’ll tally the pain. Those 9,950,510 shares would have been worth $358,218,360 if Highfields had taken the buyout when Clear Channel was taken (more or less) private. At last Thursday’s closing price of $1.25 they were worth $12,438,137.50. That’s a loss on paper of well over a quarter billion bucks.

Highfields had argued against the original buyout offer because the investment firm’s managers were convinced that radio stock in general and Clear Channel in particular were undervalued and that the radio assets were worth a lot more in the long run. It prevailed in getting the offer amended so that not only was the price raised (although eventually dropped again in a legal settlement with the banks funding the deal), but shareholders who wanted to could take equity in the new company, CC Media Holdings.

You may be asking, if Highfields is so gung-ho on Clear Channel, why doesn’t it buy more of the stock at the lower prices? But the terms of the buyout deal limited how much any single shareholder besides Bain and TH Lee could own. Highfields took the max when the deal went to closing.

Meanwhile, it looks like the Fidelity Mutual Funds have been placing bets on CC Media. Fidelity had been a big Clear Channel shareholder but reduced its stake significantly as the buyout was pending. According to the annual statement filed this month, FMR Corp. owns directly or indirectly 4,287,500 shares of CC Media. Two Fidelity Mutual Funds available to the public currently hold shares of CC Media. Fidelity Dividend Growth Fund owns 1,200,000 shares and Fidelity Equity-Income Fund owns 2,159,142 shares.

Who else are big holders? Marathon Asset Management owns 2,927,931 shares. Abrams Capital reported last August that it owned 2,488,328 shares.

RBR/TVBR observation: The folks at Highfields could not have foreseen the ad market collapse of 2008 that continues today any more than Bain, TH Lee or you and I could. With 20/20 hindsight, it is clear that Highfields would have been much better off taking the $36 per share buyout and investing its money elsewhere. But, the investment company indicated that it is in for the long haul and it is hanging tough.