Who will own the new Clear Channel?


If you answered Thomas H. Lee Partners and Bain Capital, you’re only partly right. It’s a lot more complicated than that.

This Thursday is when shareholders vote on the long, long-pending buyout to take Clear Channel Communications private. A favorable vote on the $36 per share offer is pretty much guaranteed, but CCU still needs to round up two-thirds of all shares to approve the $23.8 billion deal, which is then set to close on July 30th.

When the buyout closes, TH Lee and Bain will have voting control of CC Media Holdings, a Delaware corporation which will own Clear Channel. CC Media Holdings will not be listed on any stock exchange, but it will have a stock ticker, CCMOV, and be traded in the over the counter market’s so-called “pink sheets.” RBR/TVBR will publish the stock price daily, but it remains to be seen how much trading volume there will be.

Current CCU shareholders had until last Thursday to indicate whether they wanted to exchange any or all of their CCU shares for new CCMOV Class A shares. A maximum of 30% of the stock of CCMOV is available for that conversion, or 30,612,245 shares, with the restriction that no single shareholder may receive more than 11,111,112 shares in the exchange. Highfields Capital has escrowed 11,111,112 shares from its stake toward achieving that maximum.

Meanwhile, approximately 625,000 shares of restricted stock held by Clear Channel management and employees will be converted to CCMOV Class A shares vesting on the same basis. Clear Channel founder Lowry Mays is committed to rolling over $25 million of his CCU stake into CCMOV stock, and CEO Mark Mays and President/CFO Randall Mays will each roll over $10 million. In addition, Mark and Randall will each receive $20 million of restricted stock when the deal closes and they’ll receive stock options equal to 2.5% of the fully diluted shares of the new company.

Depending on how many of the 30,612,245 shares available are actually picked up by current Clear Channel shareholders, Bain and TH Lee will own a stake of 66-82% of CCMOV. Theirs will be Class B shares, but not with the lopsided voting rights of the Class B shares seen in some other media companies. The private equity firms have been out shopping part of their stakes to new institutional investors, who are being sold non-voting Class C shares. The voting power of the Class B shares, relative to the Class A shares, will increase in proportion to the Class C shares sold. For example, if half of the Bain/Lee stake is sold to other investors, each remaining Class B share will have the voting power of two Class A shares.   

So, if the stock conversion is fully subscribed, voting power in the new CC Media Holdings could lie 66% with Bain/Lee, roughly 10% with Highfields Capital, a little over 2% with the Mays family and about 20% with everyone else holding the Class A shares. The Class A shareholders will, however, retain the right to elect two of the 12 directors. Highfields also gets to pick one and to be consulted on another.

RBR/TVBR observation: It ain’t over until the fat lady sings, but we think we hear her warming up her vocal chords. That Texas requirement of approval by two-thirds of all shares – not just two-thirds of those actually voted – has no doubt had CCU and its financial advisors beating the bushes to make sure that the proxies are mailed in. But with no organized opposition, the votes should be there to get the job done. As a result of the earlier legal settlement, the money is all escrowed for the July 30th closing, so there’s no question of the banks showing up with their cash this time.