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Clear Channel Buyout Still Blurry

The company remains mum on its buyout plans, but sources expect an announcement this week.

After its board reportedly reviewed buyout bids,

Clear Channel Communications

(CCU) - Get Cia Cervecerias Unidas SA Report

was mum Wednesday on the fate of its media properties, but sources on Wall Street are expecting a deal to be announced soon.

Shares of Clear Channel recently were trading down 10 cents, or 0.3%, to $34.01 after media speculation that an announcement would be made before Wednesday's opening bell fell flat.

"It's understood that the bids came in on Monday and the board has to review those bids," says Stanford Financial Group analyst Frederick Moran. "Given the magnitude of this transaction, there's no reason to rush through it."

According to media reports, two private equity consortiums submitted bids on Clear Channel. The company, based in San Antonio, Texas, owns more than 1,000 radio stations and an outdoor advertising subsidiary, and it's currently valued at around $16.8 billion.

One group of bidders includes Providence Equity Partners, Blackstone and Kohlberg Kravis Roberts; the other consists of Bain Capital and Thomas H. Lee Partners. Texas Pacific Group recently dropped out of the latter consortium.

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Clear Channel didn't return calls seeking comment for this story, and the bidders declined to comment. The company said last month that it was evaluating strategic alternatives for its business and had hired investment bank Goldman Sachs as an advisor.

A number of Wall Street sources speculated that shareholders will ultimately be paid between $36 and $38 a share for their holdings.

Miller Tabak analyst David Joyce holds a $36 price target on shares of Clear Channel. He values the shares at around $34, based on "where they could finance the deal and use up all the remaining free cash flow for debt service without an incremental private equity investment."

With some private equity investment, Joyce says there is still some valuation upside for the potential new owners if they buy the company for $36 a share.

"The market is trading the stock a little under $35 and that would indicate they're expecting an all-cash offer to close within none-to-12 months, assuming the offer is a little better than $36," he said.

One wild card in the auction process is Clear Channel Outdoors, the outdoor advertising subsidiary. Moran says the most likely scenario is that that business will be completely spun off from the parent, which can take on a higher portion of debt and service it with its strong cash flows.

Otherwise, the outdoors subsidiary could be taken private along with its parent in a leveraged buyout, or it could be sold to a third party.

"I expect that we'll hear something one way or another fairly quickly, but I don't think we can pin that down to hours or even days," Moran says. "Sometime this week seems reasonable."