CC Mulls Taking Company Private

[petertrip]

Never thought I would see this:

http://mediaweek.com/mw/news/recent_display.jsp?vnu_content_id=1003314392&imw=Y

 

[OldGringo]

Never thought I would see this:

http://mediaweek.com/mw/news/recent_display.jsp?vnu_content_id=1003314392&imw=Y

This proves that radio companies are undervalued, and there are private equity firms that will buy them at current prices because they know radio has much greater value.

 

[adguy]

I disagree somewhat. Radio station owners that have cut expenses by cutting content (i.e. really good on-air talent) have REALLY devalued their stations because now, more than ever CONTENT IS KING. With Ipods, satellite radio and mp3 players there REALLY has to be a compelling reason to tune into a radio station. Stations with the same old and new formats and playlists are not providing compelling content that will drive significant listenership. Most of the strong on-air talent is gravitating toward satellite radio. This will leave a significant void in terrestrial radio content availability. Station owners like CC have apparantly recognized this. Their expense cutting is solely to satisfy the stockholders by cutting the bottom line. If they are private, they might be free to spend on content (i.e. great on-air talent development) and better more localized marketing efforts like better contests and more tickets to live events like the old days. Stations that are not delivering compelling content are truly less valuable today. That's why you see stock prices down. They are not undervalued.

 

[kendro]

Undervalued?
I don't think so.

 

[nuzchick]

Undervalued?
I don't think so.

How could radio not be undervalued? All the signs point to wall street not understanding the true value of the medium.

 

[kendro]

Undervalued?
I don't think so.

How could radio not be undervalued? All the signs point to wall street not understanding the true value of the medium.

Growth potential
Just what, exactly, are they going to do to make their bottom line climb drastically in the short term? Answer that and you're faced with the same challenge as any buy/sell investor. Also, how does the industry signify that it will even be viable in the long term? My guess (and my money) is that it will not in any way close.

Player's Actions
The fact that someone who knows a lot more than us thinks they need to either dump their company or get it off the radar.
http://www.bloomberg.com/apps/news?pid=20601087&sid=a2m8M50BTkz8&refer=home

Relevance in CURRENT market conditions
Investing money in the media instead of defense or energy stocks (at this time) is grandly stupid.
Have you looked at the profit ExxonMobile made just last quarter?

No, it isn't just over-valued, it's near the very last place investing makes sense!

 

[content]

I disagree somewhat. Radio station owners that have cut expenses by cutting content (i.e. really good on-air talent) have REALLY devalued their stations because now, more than ever CONTENT IS KING. With Ipods, satellite radio and mp3 players there REALLY has to be a compelling reason to tune into a radio station. Stations with the same old and new formats and playlists are not providing compelling content that will drive significant listenership. Most of the strong on-air talent is gravitating toward satellite radio. This will leave a significant void in terrestrial radio content availability. Station owners like CC have apparantly recognized this. Their expense cutting is solely to satisfy the stockholders by cutting the bottom line. If they are private, they might be free to spend on content (i.e. great on-air talent development) and better more localized marketing efforts like better contests and more tickets to live events like the old days. Stations that are not delivering compelling content are truly less valuable today. That's why you see stock prices down. They are not undervalued.

adguy- I really agree with your comments regarding the cutting of content. The current Wall Street climate has resulted in a radio GM & Program Director being charged with the task of cutting as many expenses as possible, multi-tasking, and an emphasis on immediate revenue to the point that FM radio's long-term viability is in jeopardy. While I certainly understand that radio is a business established with the goal of making money, I also realize that new delivery platforms are lurking in the shadows and inevitably will continue to displace the radio brands which are not properly nurtured.

Before I slip off my soapbox, does anyone think that this environment will change with private equity companies taking control? I fear the scenario will continue to worsten until they've reached the point of no return. And now, as word from our sponsor...

 

[OldGringo]

Growth potential
Just what, exactly, are they going to do to make their bottom line climb drastically in the short term? Answer that and you're faced with the same challenge as any buy/sell investor. Also, how does the industry signify that it will even be viable in the long term? My guess (and my money) is that it will not in any way close.

Player's Actions
The fact that someone who knows a lot more than us thinks they need to either dump their company or get it off the radar.
http://www.bloomberg.com/apps/news?pid=20601087&sid=a2m8M50BTkz8&refer=home

Relevance in CURRENT market conditions
Investing money in the media instead of defense or energy stocks (at this time) is grandly stupid.
Have you looked at the profit ExxonMobile made just last quarter?

No, it isn't just over-valued, it's near the very last place investing makes sense!

By going private, they do not have to run the company in accordance with Wall Street's reactions... they can engage in longer term strategies, make changes that do not seem immediately logical, and get away from managing for the street and not for the company's best interests. Add to that the fredom from SOX and the ability to build long-term value, and it makes sense. If they can get a rate of return that is superior to prevailing junk bond interest rates, then there is logic in going private because the company is undervalued by the Street. The idea is to buy good assets that are undervalued.

We already had the $13 billion private capital buyout of Univision, and now we have CCU. Look for meore of these as the industry realizes that there is more value to private than to public investors.

 

[gitch]

Or perhaps by going private, being a Texas Based company, they can avoid the new franchise tax increases on corporations.

 

[kendro]

"Private" has it's advantages. The best case is the Marmon Group. They are fantastically strong and profitable and a family oriented company with solid core values.

There is a perception that Clear Channel's values are askewed. This gives a fear that freedom from federal and state corporate law would allow absolute power to become absolute corruption.

Look for them to find a buyer.
Unless they have enough free cash to buy back all their issued stock and debts.

 

[OldGringo]

There is a perception that Clear Channel's values are askewed. This gives a fear that freedom from federal and state corporate law would allow absolute power to become absolute corruption.

A private company complies with all laws except the publicly traded governances of Sox and the SEC, which are intednded to protect shareholders. With a private company, the sharholders run the company, and there are only a few of them.

Look for them to find a buyer.
Unless they have enough free cash to buy back all their issued stock and debts.

All they need to do is an LBO, where they find financing at a lower tate than the rate of return of the enterprise. Very simple if the math works.

 

[kendro]

Actually, the term 'all' isn't entirely accurate. Most or many would be better. Otherwise there would be no financial benefit in privatization. Since CCU was chartered over 30 years ago, they must have a darn good reason for the move.

Also, if you are calling a "bootstrap" an LBO, the combined debt of the LBO partner added to the debt of the company would be an interesting number.
Ask the fine folks at Balli-Klockner about those pesky little banking laws.

Perhaps they should "stay the course" until the tide carries them where it may.

 

[OldGringo]

Actually, the term 'all' isn't entirely accurate. Most or many would be better. Otherwise there would be no financial benefit in privatization. Since CCU was chartered over 30 years ago, they must have a darn good reason for the move.

Yes, "all" may be a bit simplistic or wrong. The explanations have mostly to do with not having the company so subject to short term Wall Street reactions as well as the possibility of buying the whole thing at an interest rate that is lower than the cash flow without worrying about short term issues.

Also, if you are calling a "bootstrap" an LBO, the combined debt of the LBO partner added to the debt of the company would be an interesting number.
Ask the fine folks at Balli-Klockner about those pesky little banking laws.

CCU shed a lot of debt by spinnging what is now Live Nation, debt included, to the shareholders. It might be that Outdoor, a separate entity, owend about 80%, could be sold to pay down debt if they want to get additional money for the core radio holdings. Of course, this is speculation.

Perhaps they should "stay the course" until the tide carries them where it may.

The tide seems to be towards going private, either with investment groups or with an LBO. The assumption is that the company is valued on t he market less than they think it is worth.