Updated from 8:15 a.m. EST

Clear Channel Communications

(CCU) - Get Report

, the big radio and advertising company, said Tuesday that it would buy

SFX Entertainment

(SFX)

, the nation's largest producer of concerts.

But Wall Street reacted negatively to the all-stock deal, as Clear Channel's shares fell more than 11%.

Under the terms of the deal, SFX's class A shareholders would receive six-tenths of a Clear Channel common share for each SFX share. The two holders of SFX's class B stock -- Robert F.X. Sillerman, the company's chairman, and Michael Ferrel, the company's president and chief executive -- would receive a one-for-one stock swap.

According to filings with the Securities and Exchange Commission, Sillerman owns 89.8% of the 1.7 million outstanding class B shares, while Ferrel owns 10.2%. Including Sillerman's 8% of the class A shares, Sillerman controls 34.3% of the total voting power in SFX, while Ferrel controls 3.6%, because of weighted voting rules.

The companies had valued the all-stock deal at $3.3 billion, based on Monday's closing stock prices. But that value declined with the price of Clear Channel's stock Tuesday.

Shares of Clear Channel fell 8 9/16, or 11.4%, to close at 66 5/8. Based on that price, SFX's class A shareholders would receive Clear Channel stock valued at $39.98 for each of their shares. SFX's class A stock closed up 1/2, or 1.3%, at 38 1/2. SFX's shares had traded as high as 42 1/2 earlier in the day, but the continuing decline in Clear Channel's stock price pulled it down.

As part of the deal, Clear Channel would assume about $1.1 billion in debt, net of cash. SFX has spent around $1.5 billion on recent acquisitions.

Clear Channel, based in San Antonio, owns more than 500,000 billboards around the world and operates 867 radio stations and 19 television stations in the United States. SFX, based in New York, owns or operates 120 U.S. entertainment venues, producing concerts, theater and sporting events.

Just last Friday, SFX denied rumors that it was in takeover negotiations with CBS

(CBS) - Get Report

.

Business Week

, citing investment bankers, reported talks between the two companies.

Christopher H. Ensley, an analyst for Lazard Freres, said regulators would probably approve the deal because Clear Channel would not gain any new media outlets. The company has slowly become involved in promoting concerts, and SFX's ability to sell tickets online will help Clear Channel promote artists on the Internet and get to know audiences better, Ensley said.

The companies also said the deal was aimed at helping them "pursue initiatives relating to the Internet and music."

Asked why Clear Channel needed to own the promotion company in order to broadcast concerts, Ensley said: "I think that's some of what's hurting the stock right now. People are saying, 'why do they need to own it.'"

Ensley rates Clear Channel a buy, and his firm hasn't done underwriting for the company. He doesn't cover SFX.

Harry Curtis, an analyst for Robertson Stephens, said that the deal would probably create new revenues and cost savings over the long run, but that it was unclear how the companies would integrate SFX's sports, family and theater offerings.

Music comprises 60% of SFX's revenues.

Investors might be wary for other reasons, Curtis said. "You've got to ask yourself why's he selling out now and what do you make of this $30-a-share difference," he said, referring to Sillerman and the different buyout prices for class B and class A shares.

In addition, Curtis said, "you've got a high multiple company buying a low multiple company. Is it going to bring down the multiple like it did with AOL?"

SFX shares have been in a slump since last summer, trading in the mid-30s lately, off a 52-week high of 51 5/8. SFX shares rallied sharply Friday and Monday in anticipation of a deal, closing Monday at 38.

In December, analysts slashed their forecasts for SFX's earnings to about $30 million from about $45 million. Sillerman, the company's chief executive, described the expected shortfall as a strategic

choice , telling Wall Street he would not cajole Crosby, Stills, Nash & Young to perform after a band member's injury.

SFX also released its annual financial results Tuesday, showing that the company's loss had narrowed to $63.9 million, or $1.10 a share, in 1999, from $68.7 million, or $1.83 a share, in 1998. Revenues rose 89%, to $1.68 billion, from $888.9 million.

But the company's chief financial officer, Thomas P. Benson, said a quarterly breakdown would not be available until the company files its report with the SEC.