Clear Channel’s $26.7 Billion Sale May Not Need FCC Vote
Clear Channel’s $26.7 billion sale might not be subject to a vote by Commissioners if no ownership waivers are involved, said FCC and industry officials. The company likely hasn’t gotten waivers from Commission ownership rules because it hasn’t made any large acquisitions in recent years, said broadcast lawyers. The Media Bureau has authority to approve radio and TV station license transfers without full Commission vote when multiple station ownership limits aren’t exceeded, said agency officials. Commissioners typically vote on deals involving waivers, they said. A Clear Channel official wouldn’t say if the company has waivers, but industry lawyers said there don’t seem to be any. Even if Clear Channel has no waivers, the FCC may take time to review the sale. Minority groups said they may seek asset divestitures in markets where Clear Channel exceeds FCC ownership limits.
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Activists opposing industry consolidation won’t necessarily try to stymie the deal, they said, noting that it would break up the company, a shift they support. Clear Channel agreed to sell itself to private equity firms Thomas Lee and Bain Capital, it said Thurs. The broadcaster separately put 448 radio stations - 39% of total holdings - and all 42 of its TV stations up for sale. The carve-out likely will occur before the equity firms finish buying the rest of Clear Channel, said an official involved in the deal. That would give the private equity firms money to pay down Clear Channel’s $8 billion-plus debt, said the official.
“The breaking up of Clear Channel is a welcome prospect,” Media Access Pres. Andrew Schwartzman said: “It is further evidence that the ‘bigger is better’ model is not only bad for service to the public, but is also being rejected by the marketplace.” Other activists echoed his remarks. Shares of Clear Channel rose, as did those of Tribune, which is trying to sell its 25 TV stations.
FCC review will take no more than 9 months, Bear Stearns analyst Victor Miller said. Clear Channel likely expects to complete the deal by Jan. 1, 2008, he said: “I think that means they're pretty confident” of Commission approval. Clear Channel has been a client of Bear Stearns. Another large private equity broadcast deal is headed for a FCC vote, said an agency official. Univision’s $13.7 billion sale of TV stations and other assets to a group of investors including Thomas Lee will go to commissioners “in the near future” for a vote, said an FCC staffer. That deal involves multiple waivers, the staffer said.
Regulators may take a while to review Clear Channel’s deal, according to some observers. “The ensuing review period, typical with any license transfer, will be longer than usual,” said RBC Capital’s David Bank. It’s almost certain commissioners will vote on the deal, which will be controversial, Schwartzman said: “This unquestionably will have to be done at the Commission level.” Companies whose holdings exceed recent station ownership caps but predate them aren’t subject to the newer rules because of a “grandfather” clause, said an FCC official. Those exceptions don’t transfer to buyers, said the official.
Clear Channel likely will find buyers for its TV stations, a broadcast executive at another company said: “The TV acquisition market is broad and deep and vibrant enough to provide for the sale of these stations… There may not be a single bidder for all of them. But I think they will do fine in selling them, and I hope we are able to buy some of them.” One positive for potential TV station buyers: There’s no FCC backlog of applications awaiting approval, said an official. Emmis isn’t interested in the radio stations Clear Channel put up for sale, a spokeswoman said: “Emmis’s focus [is] really in the larger markets.” CBS is among other companies selling smaller-market stations.
Minority broadcasters may benefit from Clear Channel’s decision to sell the small and mid-market radio stations, said advocates. They will push the company to sell those assets as soon as possible rather than wait until after the company goes private, they said. “Is there potential upside here? Absolutely,” Francisco Montero, an Independent Spanish Bcstrs. Assn. dir., said: “But there’s a lot of questions that need to be answered.”
The FCC should require Clear Channel to sell assets that exceed Commission ownership limits before approving the sale, said National Assn. of Black Owned Bcstrs. Exec. Dir. James Winston: “We don’t want to see any waivers of the ownership rules allowing them to sell off after the merger is consummated.” When Clear Channel bought radio broadcaster AMFM in 2000, minority-owned broadcasters picked up lots of stations. Now, Montero said, “we're looking at stations that are more modest, in smaller markets, and the cash flow multiples that are being demanded for stations is not what was being demanded in 2000. We're dealing with an inventory pool that is far grater than what we saw in 2000.”
Advocates of minority ownership may initiate negotiations with Clear Channel and its buyers, Montero said: “Our group would either on its own or through some consortium of other groups… reach out to the transactional participants here, and express our interest.” The advocates could slow FCC approval by raising concern about minority ownership, broadcast lawyer Lew Paper said: “How much time it will take to get though the Commission will depend on the nature of any waiver requested and the nature of any objections that are filed.” Private equity buyers including Thomas Lee, which is buying Univision with others, may need to get ownership rule waivers of their own, he said. Congress is another potential source of delay, Paper said, because the sale “might provide a platform for Congress to raise questions about allowing another company to retain an ownership level of this magnitude.”