Picking the carcass


Now that the Clear Channel buyout has collapsed, what is the company worth going forward? Wall Street analysts are saying the trading price is likely to be around 25 bucks.

SMH Capital analyst David Miller flipped his “Buy” recommendation to “Sell” after word hit the market that the buyout at $39.20 was on the brink of collapse. Without the buyout, he sees the value of the stock at about $24.50, or eight times estimated 2008 operating cash flow. “At the end of the day, what appears to have killed the deal is brinksmanship by both sides. The CCU managers, along with the financial sponsors, refused to bend on price, and the lending syndicate, along with its shareholders, was not convinced CCU would be able to generate enough free cash flow to cover interest costs on the newly levered company,” Miller said in his downgrade report. He correctly predicted that Bain Capital and Thomas H. Lee Partners would sue the lenders in an attempt to cover some 600 million bucks in breakup fees.

At Bear Stearns, analyst Victor Miller says without a buyout deal, the trading price would be “decoupled” from the fundamental valuation and drop to the 25-26 range. With the impact of asset sales completed and pending, plus the half billion plus break-up fee, Miller projects that the implied valuation for year end 2008 should approach 32-33 per share. His assumption is that the radio operation commands an OIBDAN multiple of 7.75-8.25 times.

Anthony DiClemente at Lehman Brothers is less bullish. “Assuming a 7.0-7.5 times 2008 estimated EBITDA multiple for Radio and 9.5x 08 EBITDA multiple for Outdoor, we continue to believe intrinsic value for CCU is $25/share on a standalone basis,” he said in a note to clients.