Clear Channel Communications, Inc. (NYSE:CCU) announced its acceptance today of a definitive merger agreement with Thomas H. Lee Partners and Bain Capital Partners. The $18.7 billion buyout is to take place at $36.70 per share pending shareholder approval - the company expects the transaction to be completed by the end of 2007. This news comes after the company announced that it had retained advisors to assist it in a possible sale of the company back on October 27th. In another announcement, the company revealed that it intends to sell 448 radio stations outside the top 100 markets, as well as its television division. However, it noted that the merger is not conditioned on the sale of these assets. Why are they doing this? According to the company:

"Our TV division and departing radio stations have consistently turned in industry-leading performance. However, these assets account for less than 10% of the Company’s revenues and earnings. Change is a necessary part of success. We are adapting our business model to accommodate the rapid and substantial changes in the markets in which we operate. These are difficult decisions, but we believe they are the right ones, and necessary for our future success." (Read More)

It also makes the buyout signficantly cheaper for the acquiring private equity firms; in fact, some investors are angered that the company waited until after the merger agreement to reveal this information in detail. If it had been the other way around, any upside from these sales could have benefited shareholders instead of private equity.

The company also addressed rumors regarding layoffs, stating:

"We do not expect this privatization to result in any significant reductions to our core workforce. While future employment is never guaranteed, reductions in force are typically associated with so-called strategic mergers in which two companies and their employees are combined, rather than with transactions that are more properly characterized as financial investments such as this one. The private equity group is making a very large investment in our company, and it is in their best interest for the company to continue having the right people with the right tools to grow and prosper." (Read More)

This buyout is the latest in a series of massive LBO transactions this year by private equity, including that of casino giant Harrahs Entertainment. The deal also affects investment banks, who stand to make more than $130 million on the deal in advising and legal fees. These institutions include Morgan Stanley, Goldman Sachs, and others who have benefited from the near-record $3 trillion in deals this year alone. Clear Channel stock is currently trading at $35.36 per share, roughly 6% below the buyout premium.

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