Analysts eyed Clear Channel after the Wall Street Journal reported last weekend that the broadcaster’s attempt to go private faces resistance from its large institutional owners.
“The big question is whether CCU has enough support to get the deal approved,” wrote John Blackledge and Aaron Chew of J.P. Morgan Securities.
“Over the past month, large institutional investors have publicly frowned on the take-out price ($37.60 per share), feeling the company is worth more over the long term, especially given the appreciation of the CCO (up 35%) over the past few months,” they wrote.
“CCU is planning to do a road show in an effort to sway shareholder support for the deal. CCU needs to get 66% of shareholders to approve the deal, but at this time, three of the CCU’s top shareholders (including Fidelity) who own about 16% of the company are not in favor of the deal at the current bid price. Also, generally about 10%-15% of shareholders tend to not vote for deals, and under Texas law, failure to vote is a negative vote.”
The analysts wrote that despite public investor scrutiny, they believe the private equity consortium is not interested in raising the bid price, “which could prevent the deal from being approved by shareholders.”
According to the Journal, the vote is likely to take place toward the end of March.
The Clear Channel story is being watched for implications beyond broadcast. The Journal speculated that the shareholder “revolt” at Clear Channel “signals what could be a wave of opposition to the public-to-private binge sweeping the markets as investors question why current managers can’t squeeze out the potential profits attracting buyers’ attention.”