Signficant terrestrial radio news here: Clear Channel has said it has agreed to be acquired by Thomas H. Lee Partners and Bain Capital Partners for $18.7 billion in cash. The deal carriers a total value of $26.7 billion, including $8 billion in debt repayment.
As part of the sale, Clear Channel has said it will sell 448 radio stations (they currently own a total of 1,150 station).
It's not a done deal yet though. Clear Channel has the right to solicit bids from 3rd parties through December 7th, and has the option to negociate until January 5, 2007.
Too bad XM/Sirius can't buy CC, then close ALL the stations!
I curious what this means to the commercial stations on XM that Clear Channel controlled? This would have to be music to the ears of XM if they can get back to 100% commercial free music.
Unless the XM/CC contract otherwise states, the new owners would continue the contracts. Unfortunately. However, I'm sure the XM legal eagles are looking carefully to the contract to see if they can get out if this goes through.
It will probably mean nothing. The new owners would assume that contract with XM and that ad revenue stream.
It would depend on how the new private equity partners handle the 8.3 million shares that CC initially invested in XM that is expected to be handed over to Bear Stearns in 2008. They could also settle with cash. If it's settled with the shares, the XM arrangement is immediately canceled.
I think you have to look at XM's stock price and see where it is in comparison to how much it was when CC invested. I think CC's investment was $75 million. That would make it a little over $9 a share. Considering where XM's stock price is right now (it was over $15 today at one point), if the shares were handed over today, they would net almost $50 million.
So depending on how much higher the Private Equity Partners think XM's stock will increase after 2008, they could settle with cash and keep the shares and the XM arrangement going. A lot depends on whether they feel a SATRAD investment and programming arrangement fits into the core business. Many times, this often changes after a PE buyout, especially if they plan to chop up and sell the pieces (sometimes the pieces are worth more than the whole, like a car).
According to the link I found, to put it simply, if Clear Channel is sold, then the arrangement with XM is essentially done.
Source: SEC
Section 5.4 Operational Involvement of Clear Channel, DIRECTV and the TCM Group.
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(a) Following the Closing and for such time as Clear Channel (i) continues
to hold in excess of 5% of the Common Stock Deemed Outstanding, or (ii) retains
the full amount of its original investment in the Company, the Company agrees
that Clear Channel shall have operational rights and involvement as set forth in
the Clear Channel Operational Assistance Agreement, provided that such rights and involvement shall terminate if Clear Channel ceases to be a wholly-owned
subsidiary of Clear Channel Communications, Inc.
http://www.sec.gov/Archives/edgar/data/1091530/0000928385-99-002518.txt
>> It will probably mean nothing. The new owners would assume that contract with XM and that ad revenue stream. >>
Well at the very least, perhaps the new owners could be amenable to some sort of deal to get XM out of carrying the the commercial stations for as long as they originally had to..
WeMatt01, I think you're onto something... but I'm not so sure it's that simple. Clear Channel is being sold and everything is being moved over to a private firm. I'm not sure if it's no longer being a wholly owned subsidiary.
Though I can guarantee that XM's lawyers are all over this. Good find.