Clear Channel settlement seen good for BCE; Yahoo-Microsoft saga continues; Take three for Take-Two?

By Stephanie N. Rotondo

Portland, Ore., May 14 - What began as rumor on Tuesday turned into fact for Clear Channel Communications on Wednesday.

On Tuesday, the market was buzzing that the broadcaster was close to reaching a deal with the private equity group looking to takeover the company. Very late that evening, Clear Channel announced that it had reached a settlement with the group regarding the lawsuits filed in both Texas and New York.

Under the terms of the settlement, the parties will enter into a new agreement under which the private equity sponsors will purchase the company for a lower price of $36 per share, down from the original $39.20. Despite the decreased offer, shareholders seemed elated by the news, and the stock (NYSE: CCU) gained 55 cents, or 1.6%, to $34.85.

And while the market was considering the news as positive for Clear Channel, it also gave players some hope for BCE Inc.'s transaction. One analyst said the settlement was good news for that deal as well, though the company's stock fell slightly in trading.

Meanwhile, Carl Icahn's involvement in the continuing Yahoo Inc.-Microsoft Corp. saga has added fuel to the fire of rumors and speculation. Investors reacted positively to reports that Icahn could be getting ready to wage a proxy fight, pushing up both Yahoo and Microsoft's stock. But as the nomination deadline for Yahoo's board of directors fast approached, it was still uncertain what Icahn's plan of attack was.

After Electronic Arts Inc. reported disappointing numbers late Tuesday, some market participants were wondering if it would alter its hostile bid for Take-Two Software Inc. But one analyst opined that Electronic Arts would not materially increase its offer, despite Take-Two's belief it is worth more.

"There is no other bidder," he said. "I don't really see what their point of leverage is."

The overall tone in the equities market was firm. The Dow Jones Industrial Average closed up 66.20, or 0.52%, to 12, 898.38. The Nasdaq ended the session better by 1.58 points, or 0.06%, to 2,496.70, while the S&P 500 gained 5.62 points, or 0.40%, to 1,408.66.

Clear Channel settles; Good for BCE?

As Clear Channel reached a settlement with the private equity group looking to buy out the broadcaster, investors reacted favorably to the news.

The company announced late Tuesday that it had come to terms with the group led by

Thomas H. Lee Partners, LP and Bain Capital Partners, LLC. Under the third amended merger agreement, Clear Channel shareholders will receive $36 per share, as opposed to the original price of $39.20 per share. Alternatively, shareholders can opt to exchange their shares for new shares in CC Media Holdings Inc., the new corporation sponsored by the private equity group.

While the new agreement pushes out the closing date to the end of the third quarter of 2008, one analyst considered the news positive. He said that although shareholders will have to vote on the merger again, "they shouldn't have too much of a problem because it was not a drastic cut in price."

"It was looking like it would stay in court for a while, so a settlement bodes well," he said.

The analyst also noted that Clear Channel's largest shareholder, Highfields Capital, has already agreed to the provisions of the deal. Therefore, smaller investors are likely to follow suit, he said.

"What are their options, really?" he asked. "$36 is not that bad of a price."

The analyst attributed the gains in the stock to "elation" on the news, though he opined that it was unlikely the equity would trade higher than the offered price.

"It would make no sense to trade higher unless there was an expectation the [offered] price could go higher," he said.

In light of the Clear Channel settlement, some market players are speculating it could mean good things for other LBO deals, such as BCE.

"It is good news for other big deals, such as BCE," an analyst said. "It shows that private equity sponsors are willing to go through with it and that banks are willing to finance it."

Shares of BCE (NYSE: BCE) fell 11 cents, or 0.28%, to $38.90.

Icahn adds to Yahoo-Microsoft saga

In the continuing saga that is Yahoo-Microsoft, the game might not yet be over.

Rumors abound that billionaire investor Carl Icahn will wage a proxy fight at Yahoo. Those rumors have been further fueled by reports that Icahn has amassed a fair numbers of shares in the internet company.

With the deadline for board nominations looming, one analyst said that it makes sense that Icahn would make a play for Yahoo - though at this point it is all conjecture.

"It is just speculation," said Scott Kessler, equity analyst at Standard & Poor's. Kessler noted that Icahn has not made any statements regarding his master plan. And, while the reported number of shares Icahn has under his belt seems large, when compared to the outstanding numbers of shares it might not be so much.

"If you read carefully, the original reports say he has acquired up to 50 million," Kessler said, adding that Yahoo has about 1.4 billion shares outstanding.

But, Kessler added, this would not be the first time Icahn has stepped in to make a difficult merger happen.

"He was instrumental in getting BEA and Oracle to come to the table," he stated. While Kessler concedes that there could be a bigger fight involved, he speculated that, given the "shareholders' outcry" at Yahoo's unwillingness to talk with Microsoft, maybe not.

"The timing element suggests that there will be additional breaking news sooner than later," he said.

"The stock is trading close to $27," he added. "That is because people believe that Icahn, or maybe someone else, will a make a resurrected deal with Microsoft possible."

Kessler also stated that Yahoo's current share price could change in the near future if Icahn does not comment, or says he is not interested in a fight. The price could also be affected if there are no third-part members elected to the board of directors. Late Wednesday, Reuters was reporting that Icahn had lined up at least 12 potential board members.

Said another analyst of Icahn: "He keeps things interesting."

Shares of Yahoo (Nasdaq: YHOO) gained 54 cents, or 2.03% to $27.10, while Microsoft's stock closed up 18 cents, or 0.60%, to $29.96.

Take three for Take-Two?

With the unsurprising success of the newest installment of Grand Theft Auto - and disappointing earnings at Electronic Arts - there is some speculation in the market that Take-Two could negotiate a higher price for its company.

"EA could put a small premium on the [offer price] to get the deal done," said one analyst. "If you look at it, [EA] has a decent revenue story, but no earnings story."

"They have the cash to pay $40 per share," he added. "But if they do, their stock is going to $40."

Since the beginning of EA's hostile bid for Take-Two, the latter company has resisted a takeover, claiming it was worth more than the $25.74 per share price offered. With the offer expiring on Friday, there are some questions about how the deal will play out.

Still, "I think the deal gets done at the offer or small premium," the analyst said. "If the deal does not get done, then [Take-Two's] stock does not stay at $26 - especially since most shareholders are now arbs."

Shares of Take-Two (Nasdaq: TTWO) edged up 38 cents, or 1.43%, to $26.97, while Electronic Arts' shares (Nasdaq: ERTS) slipped $2.11, or 3.87%, to $53.46.

Broad market buzz

Virgin Mobile USA announced it was in talks with SK Telecom regarding "possible strategic opportunities." Shares of Virgin (NYSE: VM) gained 41 cents, or 13.4%, to $3.45 on the news, while SK's (NYSE: SKM) stock declined 6 cents, or 0.26%, to $23.21.

Advanced Micro Devices has been mulling splitting its business for some time. One analyst supports the idea.

"I think they do it," he said. "They have been moving to an asset-light strategy, so it is not complete conjecture on my part."

Shares of AMD (NYSE: AMD) slipped 3 cents, or 0.42%, to $7.16.

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