Wednesday, October 25, 2006

The New York Times

October 26, 2006

Radio Chain Said to Weigh Selling Itself

The Mays Family, which built Clear Channel Communications into the country’s largest network of radio stations through decades of acquisitions, is in negotiations to be taken private by a consortium of investors for more than $18.5 billion, people involved in the talks said yesterday.

The investors, who have been in discussions with Clear Channel for months, include Providence Equity Partners, the Blackstone Group and Kohlberg Kravis Roberts & Company, these people said.

The negotiations come as family- controlled media companies across the nation explore the possibility of selling their companies or taking them private. Cox Communications, the cable company based in Atlanta, went private in 2004. Cablevision, which is controlled by the Dolan family, is in the middle of negotiations to become private.

Clear Channel said yesterday in a statement that it was “evaluating various strategic alternatives to enhance shareholder value.” The company has hired Goldman, Sachs & Company as its financial adviser.

Other potential suitors have emerged in recent days. They include Cerberus Capital Management, Oak Hill Capital Partners and Thomas H. Lee Partners, people briefed on the negotiations said. Now that the company is seeking alternatives, other suitors, including big media companies, could surface.

As of yesterday, Clear Channel had a market capitalization of $16.1 billion, thanks partly to an 18 percent surge in the company’s stock since Aug. 9 amid speculation about a sale. Yesterday, shares of Clear Channel rose 15 cents, to $32.35.

Even with the rise in the company’s shares, the company could still receive a 15 percent premium through a sale, according to Eileen Furukawa, who covers the company for Citigroup Global Markets. That would represent an offer of about $37.30 per share.

Clear Channel’s shares, however, have declined during the last half-decade, reflecting the steady defection of radio listeners who are spending more time listening to iPods and visiting Web sites and writing e-mail messages. Radio stations are also under threat from subscriber-based networks like XM Radio and Sirius Satellite Radio.

More than 9 out of 10 Americans still listen to traditional radio stations, but the amount of time people tune in has slid 14 percent over the last decade, according to Arbitron ratings.

The steady dilution of radio listeners is a far cry from 1972, when Lowry Mays, the company’s chairman, founded Clear Channel. A former investment banker, he bought several channels in San Antonio, where the company still has its headquarters. In 1984, the company went public and earned a reputation for turning around depressed stations.

The Federal Communications Commission in 1992 loosened rules on owning radio stations, paving the way for Clear Channel to sweep up more stations. The company now has more than 1,200 stations, and owns a substantial number of billboards and other outdoor advertising.

The company generated $6.6 billion in sales in 2005. Its stations include Z100 in New York and KISS-FM in Los Angeles.

As Clear Channel has grown, it has come under attack for homogenizing radio entertainment by standardizing playlists, playing too many commercials and not running enough local news. This in part spurred the growth of satellite-based subscription services like XM Radio.

In 2004, L. Lowry Mays stepped down as chief executive and one of his sons, Mark, took over. Another son, Randall is the company’s chief financial officer. Before joining Clear Channel, he worked in the mergers and acquisitions department at Goldman Sachs.

Last year, Clear Channel sold 10 percent of Clear Channel Outdoor Holdings, its advertising unit, in an initial public offering. The company also spun off Clear Channel Entertainment, an events producer, to shareholders.