Three questions.
1, If the Clear Channel buy-out falls over, is it likely that it could be broken up?
Yes. And purchased by OTHER major groups -- including Sam Zell / Randy Michaels who have been down this path with Clear Channel before and have the resources to cherry pick what stations they want for the price.
Yes. If the Bain & Lee investment block ends up busting the deal for a lot less than the $39.20 demanded by Clear Channel for each share of outstanding stock. The stock closed for the first time below $30 today ... not a good sign for investors. A strong venture capitalist like Bain & Lee won't pay more than what the stock is worth ... especially when it is $10 a share off the mark. Clear Channel will have to make a better deal and fast if it intends to go private. Either that, or they'll be selling to the best bidder ... and look for the Tribune's Zell/Michaels combo to be there with cash in hand.
Yes. Clear Channel has already sold unattractive, under-performing smaller and medium market stations and has now axed many jobs and expenses to bring profits directly to the bottom line. Stock buyers don't like that outlook with revenue projections not being met in the first quarter ... and a $19+ billion dollar deal sitting on the table, approved by the FCC, and now, the stock dropping like a rock ... not even close to the agreed price per share.
2, Who would be likely buyers of stations if there were to be a break up?
Sam Zell & Randy Michaels are prime contenders. Many other groups are facing the same difficulties, but there are those who would drool to get their hands on some of those 700 remaining Clear Channel stations. The problem ... the cost. Spending $100-million on a major FM in New York or LA (be it Clear Channel, Emmis, Citadel, Cumulus, etc.) is not an easy thought for any publicly traded company in this economy. Revenues are down and the projection for 2008 is bleak when it comes to breaking even.
Buyers are less scrambling to make "deals" for highest prices today than before when they had cash on hand to do it. Imagine a stock like Citadel that has gone, since it bought the ABC stations for nearly $2-Billion ... from $11 a share to where it stands, now, at just under $1.70 a share. That's a lot of worth down the drain ... in six months.
Onesy, two-sey buyers in large markets tend to not want to put all their financial eggs in one basket as a hedge in this economy and would rather control a cluster. As for small markets, it's the same "economy of scale." Is the profit potential as great with high debt service? Are their private investors willing to risk "seller worth" instead of fighting for "buyer worth" in a weak economy? There are other places to put money. Radio is NOT a good investment ... banks hate most radio deals and you have to have deep pockets...small market or large.
3, Would there be bargains to be had for smaller operators?
Sure. But it will probably be a CA$H deal exclusively. Owners in small markets "getting out" don't want to carry paper, they "aren't banks" and bank lending on as volatile a business with a bad track record on return-on-investment is one that comes with high interest, lots of collateral and a substantial track record of success. In today's competitive radio economy, with less than 50 percent of the stations turning a profit, bank money is dried up for most radio deals.
As for bargains ... they are out there. I've seen two "hole in the wall fixer uppers" available for $12,000 cash. Problem is, they have no facilities, no collateral, no staff and no chance of a business community supporting it without a huge expense. You'll hear more about these kinds of stations (that will also sell for much more money, some in the hundreds of thousands of dollars) in 2008. These are called "AM stations."
Remember, as an owner, it's all about money ... and it has to be.
