PROVIDENCE BUYS CLEAR CHANNEL TV FOR $1.2B

Clear Channel Communications announced this morning that it has agreed to sell its TV division to Providence Equity Partners Inc. for approximately $1.2 billion.

The division comprises 56 television stations (including 18 digital multicast stations) located in 24 markets.

Managing the group for Providence will be veteran broadcaster Sandy DiPasquale. With Providence’s backing, DiPasquale now runs BlueStone Television, but Providence has agreed to sell that station group to Diamond Castle for $230 million.

Also included in the Clear Channel deal are the stations’ associated Web sites, the Television Operations Center, and Inergize Digital Media, which manages the Television Group’s online and wireless initiatives.

The transaction is expected to close in the fourth quarter of this year, subject to regulatory approvals and other customary closing conditions.

According to securities analyst Victor Miller of Bear Stearns, the purchase price is 15 times blended 2006/2007 cash flow of $80 million. After taxes and fees, the deal should yield about $1.1 billion for Clear Channel, he said.

Providence was one of four entities in the final round of bidding. The other bidders: Nexstar Broadcasting, Oak Hill Capital/Diamond Castle and Kelso & Co.

“This is a rare opportunity to acquire a premier collection of broadcast television stations with strong positions in many attractive markets across the United States,” said Al Dobron, a managing director of Providence Equity. “We are pleased to again partner with Sandy DiPasquale to create value at these local broadcasting stations and identify additional potential high-quality television opportunities.”

“These are well run, quality television stations,” said DiPasquale. “I look forward to continuing my partnership with Providence Equity and working with the talented CCTV employees to build on their success integrating broadcast and internet services to serve their communities.”

In an e-mail this morning to station managers, Clear Channel TV President and CEO Don Perry describes DiPasquale as a “well-respected broadcasting veteran” and “builder of stations.”

“Of all of the options out there to whom we might have been sold (and there were many!), I believe this will be the best fit for our team of broadcast professionals. Each of you has worked hard to build and grow your stations by serving your audiences, advertisers, and communities with excellence,” the Perry e-mail says.

“Together, we have created a group that is one of the very best in the industry, and we have much to be proud of,” it says.”As stations and broadcasters under the Providence umbrella, you will continue building on this reputation of excellence and do great things as the leaders and dedicated professionals that you are.”

The group includes 10 CW, eight Fox, seven NBC, six ABC, six CBS, four My Network TV, two NBC Weather Plus, two Telemundo, five independents and six stations affiliated with Clear Channel’s Variety Television Network (VTV).

Clear Channel added that these sales and “contemplated future divestitures … are not contingent upon the completion” of a separate deal under which Clear Channel Communications is being purchased by a group of private equity investors led by Bain Capital Partners LLC and Thomas H. Lee Partners LP.

That plan ran into some resistance from several large shareholders who argued the sale price was too low. The equity groups on Wednesday sweetened their buyout offer to $39 per share, or $19.35 billion, plus the assumption of about $8 billion in debt, in an effort to win over skeptical shareholders.

The new buyout offer faces a shareholder vote May 8.

David Bank, an analyst for RBC Capital Markets, told the Associated Press that the overall sale price of the television group is probably a little higher than he would have initially anticipated, but the outlook for television has improved in recent months.

Generally, the divestitures are helping Clear Channel cash out investments that are viewed more favorably by private equity than they are by the public markets right now, he said.

Regardless, it’s unlikely to sway shareholders on the leveraged buyout, Bank said.

The question continues to be whether shareholders want to bear the execution risks that will be required to get more out of Clear Channel’s radio and billboard businesses, rather than sell it to the private equity group.

”It still comes down to a bird in the hand versus two in the bush,” Bank said.

Clear Channel shares were trading down 3 cents midday Friday at $35.93 on the New York Stock Exchange.