Shareholders Fight Back

The private equity buyout of Clear Channel (CCU) isn’t going as smoothly as planned, and I’m happy about it. I don’t have a personal stake either way, but I’m glad to see shareholder activism, even in the form of large mutual funds, have an effect on buyouts.
The Wall Street Journal reports that two of CCU’s largest shareholders, Fidelity Investments and Highfields Capital, aren’t pleased with the private equity offer of $37.60 a share. The deal on the table will be funded with $23 billion of debt.
The private equity group, which is being led by Thomas H. Lee Partners and Bain Capital, may have to raise the bid to $40 a share in order to win two-thirds of the shareholders’ votes.
This is good news because if this deal gets blocked, it will reverberate across Wall Street and many potential deals will be scrapped. Put yourself in the shoes of a member of a private equity syndicate; you want as little trouble as possible. The theoretical benefit of going private is that you don’t have to deal with shareholders, but now you’re in the midst of a big proxy battle. Who needs that? Even if you win, you may have to raise your bid.
The reason the private equity deals have come is because they think it’s worth the effort. If shareholders are smart, they can change that.

Posted by on April 11th, 2007 at 9:38 am


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.