Clear Channel Communications Inc. has settled a legal dispute with the lenders funding its private equity buyout, clearing the way for the radio and outdoor advertising company to finally seal the deal nearly two years after it was first announced.
Under the agreement announced late Tuesday, Clear Channel shareholders would receive $36 a share, down from the earlier price of $39.20 a share and less than initial offers rejected by some shareholders as too low. That reduces the deal's value to $17.9 billion from $19.5 billion.
San Antonio, Texas-based Clear Channel and its private equity buyers, Bain Capital and Thomas H. Lee Partners, had sued a consortium of six banks, accusing them of trying to undermine the deal by changing the terms.
Proceedings in that lawsuit in a Texas court, and in a separate suit filed by the equity firms in New York, were delayed Monday as the parties continued to haggle over whether the banks must fund promised loans for the takeover.
Tuesday night's agreement settles those lawsuits, but the amended buyout offer still requires shareholder approval.
"This revised agreement is a win for our shareholders because it provides them with substantial value and certainty while avoiding the delay and inherent risks associated with complex litigation," Clear Channel Chief Executive Mark Mays said in a written statement.
The buyout of the nation's largest radio station operator and a global powerhouse in outdoor advertising has been tumultuous from the beginning.
First, some shareholders insisted on a higher per-share price and a chance to keep owning a part of the privatized company. Then the credit markets seized up and banks, once eager to fund ever bigger leveraged buyouts, got skittish, and Clear Channel's share price declined on fears the deal wouldn't close.
After Clear Channel announced the original deal in November 2006, the equity partners were twice forced to raise their offer when some large shareholders signaled they would oppose earlier bids of $37.60 and $39 per share. The offer of $39.20 was finally approved in September 2007.
Some shareholders also wanted to continue owning a minority stake, and the buyers agreed to allowed them to retain as much as 30 percent of the new entity, a concession maintained in the settlement Tuesday.
Clear Channel said it now expects the deal to close by the end of the third quarter, but the parties have agreed to extend the deadline for completion of the takeover to Dec. 31.
The private equity investors and the banks will deposit their funds into an escrow account within 10 business days to help ensure the deal will go through, Clear Channel said.
A busted deal would have subjected the private equity firms to roughly $500 million in fees. But funding the loan at the original terms would have cost the banks $3 billion to $4 billion in write-downs with fewer institutions looking to buy up the debt.
As deadlines approached for the deal to get completed, the equity firms and Clear Channel accused the banks of trying to sink the buyout by changing the loan terms, a charge the banks have denied.
The lawsuits accusing Citigroup Inc., Morgan Stanley, Credit Suisse Group, Wachovia Corp., Deutsche Bank AG and The Royal Bank of Scotland Group PLC of tortious interference were filed in March.
"The banks are very pleased to have reached a constructive resolution of the matter," said Chad Leat, chairman of Citigroup's alternative asset group and a representative of the lenders.
Clear Channel shares gained $1.43, or 4.4 percent, to close at $34.30 Tuesday. The shares had jumped nearly 10 percent the previous day, when reports surfaced that the parties were working on a settlement that would re-price the deal at $36 per share.