URL http://query.nytimes.com/gst/fullpage.html?res=9406E6DB113EF937A35756C0A9619C8B63

DATE/ AUTHOR None	AUTHORS: Andrew Ross Sorkin

H Clear Channel Board Rejects Sweetened Offer From Bidder

S1 Clear Channel Communications, the nation's largest radio broadcaster, said last night that its board had rejected a revised offer by two equity firms that had agreed to buy the company, but are now trying to keep the deal from falling through.

S2 The new offer was a last ditch attempt to save the deal from being voted down by shareholders next week, but now means the buyout is almost certain to be rejected.

S3 Clear Channel said that the two firms -- Bain Capital Partners and Thomas H. Lee Partners -- had proposed increasing their bid from $39 a share to $39.20 and allowing shareholders to own a stake once the company goes private.
S4 That would allow shareholders to participate in any profit from a sale or initial offering in several years.
S5 The buyout firms had offered shareholders up to 30 percent of the company after it became private.

S6 The proposal came just days after Institutional Shareholder Services, the influential proxy advisory firm, recommended that shareholders reject the $39 a share bid, effectively killing the deal.

S7 Before making the latest proposal, Bain and Thomas H. Lee consulted Highfields Capital Management, one of Clear Channel's biggest shareholders that had planned to vote against the deal, according to people involved in the talks.
S8 Highfields had agreed to vote in favor of the deal, these people said.

S9 But, Clear Channel said last night that in determining to reject the proposal, ''significant shareholders of the company have privately or publicly made known their opposition to the merger at $39 per share and their lack of interest in stub equity,'' referring to the stake that shareholders could have kept under the plan.

S10 Stub equity was recently introduced to shareholders in the United States as a way to placate shareholders who had watched new owners of buyouts reap large profits by flipping the companies a few years later.

S11 Just last month, shareholders of Harman International Industries, the maker of JBL speakers and Harman Kardon home theater systems, accepted a stub equity deal from buyout firms that included Kohlberg Kravis Roberts and Goldman Sachs.

S12 Interestingly, Goldman Sachs is the adviser to Clear Channel that recommended the board reject the most recent proposal that also used stub equity.

S13 Under the terms of the latest proposal, the buyout firms would have financed the 20 cent a share increase by having the Mays family, which founded Clear Channel, receive $37.60 a share, which was the price the company had originally accepted last November before the buyout firms raised their offer to $39 a share in a failed attempt to appease shareholders.

S14 The Mays recused themselves in the vote over the new offer, Clear Channel said.
S15 The shareholder vote is Tuesday.
S16 Some investors are now expecting the company to pursue a recapitalization, and some shareholders could mount a proxy fight.

