Clear Channel Outdoor announced a “shareholder rights plan” on May 19:

SAN ANTONIO, May 19, 2020 /PRNewswire/ — Clear Channel Outdoor Holdings, Inc. (CCO) (the “Company”) announced today that its board of directors (the “Board”) unanimously adopted a shareholder rights plan (the “Rights Plan”) to protect the interests of all Company shareholders.

In adopting the Rights Plan, the Board took note of the substantial impact of the COVID-19 pandemic on the Company’s global business and the significant decline in the Company’s stock price.  The Rights Plan is designed to allow the Company’s shareholders to realize the expected benefits of the long-term value of their investment by reducing the likelihood that any person or group would gain control of the Company through open market accumulation during the market dislocation caused by COVID-19 without appropriately compensating the Company’s shareholders for such control or providing the Board sufficient time to make informed judgments.

The Rights Plan is not intended to prevent or interfere with any action with respect to the Company that the Board determines to be in the best interests of shareholders.

The Rights Plan is similar to plans adopted by other publicly traded companies. Pursuant to the Rights Plan, the Company is issuing one right for each share of common stock as of the close of business on May 29, 2020.  The rights will initially trade with the Company common stock and will generally become exercisable only if any person (or any persons acting as a group) acquires 10% (or 20% in the case of certain passive investors) or more of the Company’s outstanding common stock (the “triggering percentage”).  The Rights Plan does not aggregate the ownership of shareholders “acting in concert” unless and until they have formed a group under applicable securities laws.  If the rights become exercisable, all holders of rights (other than any triggering person) will be entitled to acquire shares of common stock at a 50% discount or the Company may exchange each right held by such holders for one share of common stock.  Under the Rights Plan, any person who currently owns more than the triggering percentage may continue to own the shares of common stock but may not acquire additional shares without triggering the Rights Plan.  The Rights Plan does not contain any dead-hand, slow-hand, no-hand or similar feature that limits the ability of a future board of directors to redeem the rights.

The Rights Plan has a 360-day term, expiring on May 14, 2021.  The Board may consider an earlier termination of the Rights Plan if market and other conditions warrant.

Insiders Take:  A shareholders right plan is also called a poison pill.  Shareholder rights plans were devised in the early 1980s as a way to prevent potential takeover bidders from negotiating a price for sale of shares directly with shareholders, and instead forcing the bidder to negotiate with the board.

Clear Channel stock is depressed.  Since the start of the 2020 CCO  has declined by 67%.  Look at the chart.

Lamar and Outfront have dropped, but partly recovered.  Lamar is down 22%.  OUTFRONT is down 43%.

In addition to Covid, Clear Channel Outdoor is struggling with:

• high debt levels
• a troubled Chinese subsidiary (which they have sold)
• underperforming European assets

CCO has a terrific North American asset group which is undervalued. The undervaluation creates the potential for a takeover group to offer to buy shares directly from individual shareholders.  The Board of Directors always will prefer to handle negotiations related to a sale of stock or assets and a shareholders rights plan helps to make sure that happens.

Interesting that the rights plan proposed by the Board has a maximum one year life.  Looks like the Board sees values stabilizing in the next 12 months. Or perhaps it is has something to do with their recent statements that they are willing to sell assets.

Was the decision good for shareholders?  The market said no.  Clear Channel Stock fell by 3% on the 19th, the day the rights deal was announced.  The S&P 500 was down 1%, Lamar was up 1.6% and OUTFRONT was up 2.8%.

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