Highfields Capital Management agreed to support a $19.5 billion buyout of Clear Channel Communications Inc. (NYSE: CCU), the largest U.S. radio broadcaster, in exchange for the right to name a director and have a say in company transactions.
Private equity firms Thomas H. Lee Partners LP and Bain Capital LLC reached a written agreement with Highfields to ensure that their six-month campaign to take Clear Channel private would win shareholder approval.
The firms raised their bid to $39.20 a share and let investors retain up to 30 percent of the equity in the company to win over big holders. Highfields, Clear Channel's third-largest shareholder with a 5 percent stake, will vote in favor of the buyout, the company said today in a regulatory filing.
"What really tipped the scales was participation in equity when Clear Channel goes private,'' David Joyce, an analyst with Miller Tabak & Co. in New York, said in an interview. He has a Neutral rating on the shares and doesn't own them.
Highfields and Fidelity Investments, owner of about 9.2 percent of the stock, had spurned the initial bid of $37.60 a share as too low, and Highfields sought to retain a stake and some say in management.
Shareholders other than the private equity firms would be entitled to appoint two directors to the board, according to the voting agreement filed today. The agreement gives Highfields the right to designate one of those two board members and to consult with other public shareholders on naming the other.
Restrictions on Bain, Lee
The agreement also restricts Bain and Lee from "entering into affiliate transactions with the company'' unless approved by the public shareholders or the independent directors. Such transactions could include the buying and selling of assets, the issuing of stock or changing top management.
Lee and Bain also agreed that public shareholders will share equally in all dividends and other distributions, Boston-based Highfields said in a statement.
Members of the founding Mays family will remain as the company's managers. Mark Mays is chief executive officer and his brother, Randall, is president and chief financial officer. Their father, Chairman Lowry Mays, is a company co-founder.
Highfields, an investment firm with about $10 billion in assets under management, controls 24.9 million shares of Clear Channel. Fidelity, the world's largest mutual-fund company, controls about 45.8 million Clear Channel shares.
Two-thirds of San Antonio-based Clear Channel's shareholders must approve the buyout, under Texas law. A date for the shareholder vote has not been set.