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It is hard to find anyone predicting anything but a continuing decline in the audiences for radio, newspapers and television broadcasts.
Indeed, confusion about the effect internet and other forms of digital distribution will have on traditional advertising and subscription income is making it difficult to predict earnings even a year down the road.
With this backdrop, the sale of Clear Channel, the biggest US radio group built up by the Mays family during the frenzied acquisitions boom in the 1990s, to private equity investors for nearly $27bn including debt is an important moment for the media sector.
The willingness of private equity investors and banks to buy Clear Channel at valuations above those placed on it by stock markets could lead to other buyouts or sales attempts at media companies.
“Traditional media is at a crossroads and management teams and boards are frustrated by their low share prices,” said a media analyst at a large investment bank. “It is increasingly attractive for them to put themselves up for sale and see what happens.”
Clear Channel, the buyout which is one of the biggest ever and is likely to net the Mays family about $1bn, is particularly interesting because the deal was done by management and the board.
Recent large media sales, such as the sale earlier this year of newspaper group Knight Ridder and the efforts by newspaper company Tribune to find buyers, were initiated by disgruntled shareholders, who forced the board to take action to try and recoup some of the money they invested.
“Clear Channel is the most important media deal so far,” said one senior banker. “Not only is its scale important – it sets a new benchmark for going-private deals – but the board is voluntarily saying they’re better off private than public.”
Private equity investors, despite the mountains of equity they are willing to invest and the ease with which they can raise debt, are not likely to pounce on all media assets, however. In the sale of Knight Ridder, private equity bidders were notable for their absence.
Even in Clear Channel’s case, the attraction was not so much its radio stations, but its outdoor advertising business, one of the few media sectors that is not suffering from a decline brought on by digital distribution.
“There are few investors who want naked exposure to one particular segment of the media business due to the uncertainty about future earnings,” said Jonathan Jacoby, analyst at Bank of America. “The deals that are being done are more complex, consisting of different businesses, which means they can include assets which are undervalued.”
More than a month after Tribune announced that it was considering strategic alternatives, it is still unclear what the likely outcome will be. The company includes such assets as the Los Angeles Times, New York Newsday and Chicago Tribune newspapers, 26 television stations, and the Chicago Cubs baseball team.
There are a host of different scenarios – from a takeover of the entire company by a private equity firm, to the sale of prize assets such as the LA Times to local billionaires such as David Geffen. Some have speculated that management might lead a buyout of the Chicago-based assets – The Tribune, the WGN television network and the Cubs and then break apart the rest.
“It’s easier to put a value on the television stations than the print assets,” said Barry Lucas, vice-president of research at Gabelli & Co. One complicating factor is the enormous tax bill that the company would incur if it sold off the pieces. The other is media ownership rules.
One thing that appears certain is that – having put the company in play - the Tribune board will press ahead with a deal of some variety. “The genie really is out of the bottle,” Mr Lucas said.
A successful completion of the Clear Channel buyout could tempt more companies to let this genie out.