Clear Channel Communications chairman and CEO Lowry Mays and SFX Entertainment executive chairman Robert F.X. Sillerman have taken a quantum leap on the first Leap Day of the century, announcing a definitive merger agreement between SFX and Clear Channel on Feb. 29. The deal should be completed in the third quarter of 2000.
In essence, Clear Channel Communications will buy SFX in a stock swap valued at $2.7 - $4 billion. The purchase price includes "the assumption of approximately $1.1 billion of SFX's debt net of cash." As a stock swap, the estimated value of the deal varied from a high of $4 billion at market close yesterday to the current $2.7 billion, adjusted for today's trading.
Under the terms of the agreement, the companies reported that "SFX Class A shareholders will receive 0.6 shares of Clear Channel Communications, Inc. common stock for each SFX share, and SFX Class B shareholders will receive one share of Clear Channel Communications, Inc. common stock for each SFX share, on a fixed exchange basis." The transaction is subject to the vote of SFX's stockholders, and customary regulatory approvals and closing conditions.
Reuters reported that the purchase price represented a "63 percent premium over a 30-day trading average of SFX share price," according to Clear Channel CFO Randall Mays.
SFX shares were up as high as $40 in early trading on the New York Stock Exchange. The stock is now trading at 39, up one point, or 2.63 percent from yesterday's close. Clear Channel shares were down to $66.25, nearly 12 percent, which shaved roughly $600 million off the value of the deal since it was announced early today. After a prolonged acquisition program of its own, SFX has grown to become an integrated entertainment and sports franchise that develops and manages touring Broadway shows, and sells Broadway subscription series and individual productions in 55 markets. The company also produces a broad variety of live entertainment events locally, regionally and nationally. SFX has 122 venues overall, and owns or operates venues in 31 of the top 50 domestic markets. SFX represents 650 professional athletes and claims it is the largest producer and promoter of specialized motor sports shows in the U.S.
Clear Channel Communications is a leader in the out-of-home advertising industry with radio and television stations and outdoor displays in 32 countries around the world. Altogether, Clear Channel operates 867 radio and 19 television stations in the United States reaching over 120 million people weekly. Its wholly-owned subsidiary, Premiere Radio Networks, reaches 40 million people weekly on 7,800 affiliates. Clear Channel also has equity interests in more than 240 radio stations internationally and operates more than 550,000 outdoor advertising displays.
According to the deal, Clear Channel will "own and operate radio stations and/or outdoor advertising properties in virtually every U.S. market where SFX owns and/or operates live entertainment venues."
In a joint company release, notably the first in which SFX's executive was not the first party quoted, Clear Channel's Lowry Mays said, "This transaction allows Clear Channel, through SFX, to gain immediate leadership in the highly attractive, live entertainment segment, while taking advantage of the natural relationship between radio and live music events."
Beyond leveraging Clear Channel's broadcasting and outdoor advertising platforms, the deal also paves the way for Clear Channel to "pursue initiatives relating to the Internet and music."
"Having known the Mays family for almost 20 years and having watched the spectacular growth of the company and performance of their stock, it was a surprisingly easy decision to accept their offer. In the ever expanding world of media and entertainment, the combination of distribution and content is becoming increasingly important," said SFX's Robert F.X. Sillerman in a statement.
SFX's Sillerman called the merger "a classic win-win situation for our shareholders and for Clear Channel's shareholders."
Asked whether the deal marked a sellout, or the demarcation of Sillerman's leadership role in the company, an SFX spokesperson reaffirmed that the deal was a merger. "He's going to remain involved for the time being," the spokesperson said, "but his long term involvement has not been decided yet."
-- By Murdoch McBride