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For 16 months, radio giant Clear Channel Communications Inc.’s future has hung in limbo as the company battled to push through its proposed sale to Thomas H. Lee Partners LP and Bain Capital Partners LLC. With that deal now facing collapse, Clear Channel potentially faces another epic struggle: going it alone in a faltering radio industry.
The Clear Channel sale for the moment has fallen into a legal tangle over the failure to complete the transaction. Clear Channel and its private-equity buyers, Bain Capital and THL, have filed lawsuits claiming that a syndicate of Wall Street securities firms and banks has illegally balked at their obligation to fund the deal.
At issue is the credit agreement that the company would need to draw on; Clear Channel and the private-equity firms say that because of worsening credit-market conditions, the banks are trying to wiggle out of terms they agreed to when the deal was first agreed.
On Thursday, a district court judge in Texas issued a restraining order forbidding the banks from refusing to fund the merger. Later in the day, the banks filed a notice to try to move the suit to federal court.
If the deal isn’t completed, Clear Channel will be back to square one in a business that has declined sharply during the months it has chased the sale. Since it agreed on a final sale price of $39.20 a share in May 2007, the economy has taken a hit, sending advertising into a tailspin. Over-the-airwaves radio advertising, Clear Channel’s trademark business, is shrinking. Outdoor advertising, which now represents almost half of the company’s revenue, is still growing but at a much slower pace than expected even a year ago.
Boosting performance won’t be easy, particularly since the company would be relying on — and trying to retain — any disappointed stockholding employees. Under an employee stock-purchase plan that ran until last year, employees purchased millions of shares, ranging in recent years from 144,444 shares in 2006 to 319,817 shares in 2002. Millions more shares over the years were given out in the form of options.

online.wsj.com