Cable Operators

Dolans Could Learn From Clear Channel

11/03/2006 7:00 PM Eastern

With the Dolan family's proposal to take Cablevision Systems private in limbo, Merrill Lynch analyst Laraine Mancini offered up an analysis of the other leveraged buyout possibility in the media space — that of radio broadcasting giant Clear Channel Communications.

Speculation has been high for the past few weeks that Clear Channel's founding Mays family — which owns about 7% of the company's equity — would take the broadcaster private either on its own or in concert with a private-equity partner.

Fueling that speculation was the broadcaster's announcement after market close Oct. 25 that it had hired Goldman Sachs to investigate strategic alternatives. Clear Channel's stock rose 10% to $35.48 each on Oct. 26.

In comparison, since the Dolans made their $27-per-share offer for Cablevision on Oct. 8 — a 13% premium at the time — the Bethpage, N.Y.-based cable operator's stock has continued to rise. It closed at $27.68 on Nov. 1, fueling speculation that the family will have to raise its bid.

Based on Mancini's analysis, the Mays family could offer $41.36 per share for Clear Channel (a hefty 20% premium to its Oct. 31 close of $34.47 each) and enjoy a return of 13.4% on their investment.

That return widens to 23.2% if the family sells 20% of Clear Channel's radio cash flow and receives a $2.5 billion debt repayment from outdoor advertising division Clear Channel Outdoor, according to Mancini's report.

September