Not all shareholders happy with Clear Channel deal

by Barbara Shecter, Financial Post

Some shareholders, including Canadian fund manager Larry Sarbit, are unhappy with this week’s multi-billion-dollar sale of Clear Channel Communications Inc.

A private equity group led by Thomas H. Lee Partners and Bain Capital Partners said on Thursday it intends to buy Clear Channel, the largest radio company in the United Sates with more than 1,100 stations, for $19-billion, a roughly 10% premium to the share price.

But some shareholders say the deal is detrimental to them because it offers more benefits to insiders — namely the Mays family that founded the San Antonio, Tex.-based media conglomerate.

“This was an extremely one-sided deal,” said Mr. Sarbit. whose firm, Winnipeg-based Sarbit Asset Management Inc., owns Clear Channel shares in a portfolio of 10 to 15 companies, primarily based in the United States. “I suspect there are others who feel this way.”

New York law firm Wechsler Harwood LLP has launched a class-action suit in Texas, seeking an injunction against the transaction, scheduled to close next year, for damages on behalf of shareholders.

“The complaint charges Clear Channel and its directors with breach of fiduciary duties in connection with taking Clear Channel private to the detriment of its shareholders,” the law firm said in a statement.

One of the main complaints is that the two Mays sons will remain in senior executive positions at Clear Channel following the sale and are expected to receive additional compensation from change of control clauses.

“I think there’s a huge conflict of interest,” said Mr. Sarbit, a former star mutual fund manager at AIC Ltd.
Mr. Sarbit intends to launch a co-ordinated action of his own by shareholders to try to defeat the deal, said a spokesman for the fund company, who added that class-action legal counsel has been contacted.

Mr. Sarbit is also disturbed that the private equity group buying Clear Channel has said it is going to promptly sell off the company’s television holding and small radio stations, presumably to help finance the deal.

“It’s particularly galling to sit here as a public shareholder … and watch them sell the assets off, knowing we won’t benefit from any of it,” he said.

He added that Clear Channel is being sold just ahead of an expected turnaround in performance, the benefit of which is not reflected in the price Thomas Lee and Bain are paying for the company.

Before the sale of Clear Channel was announced on Thursday, the Wall Street Journal reported that shareholders were questioning the independence of Clear Channel’s board of directors and the fairness of a hasty sales process in which potential buyers were given three weeks to put together and finance bids.

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