(Bloomberg) -- IHeartMedia Inc. won dismissal of Gamco Asset Management's claims that the biggest U.S. radio-station owner shortchanged investors by improperly diverting revenue from its billboard-advertising unit.
Gamco couldn't make the case that iHeart media executives violated legal duties to shareholders by selling assets and moving funds from its Clear Channel Outdoor Holdings business to repay the parent company's debts, a Delaware judge ruled Wednesday.
The fund, founded by billionaire investor Mario Gabelli, couldn't show iHeart officials “extracted a unique benefit” by paying down debt with the advertising unit's funds that “came at the expense” of other Clear Channel investors, Delaware Chancery Court Judge Joseph Slights concluded.
“We are disappointed with the court's decision, and we are evaluating next steps,” Gamco attorney Andrew Entwistle said in an e-mail.
IHeartMedia was pleased with the ruling, said spokeswoman Angel Aristone.
In its lawsuit, Gamco, which owns almost 10 percent of Clear Channel's shares, targeted an agreement that automatically routes some of Clear Channel's business revenues to iHeart, saying it hampers opportunities and operations. It also focused on Clear Channel asset sales that allegedly provided iHeart with benefits denied to other investors.
IHeart has scrambled to stay current on more than $20 billion in debt accumulated in 2008, when the company was acquired by private equity giants Bain Capital Partners LLC and Thomas H. Lee Partners LP. Almost $8.5 billion of the debt is slated to come due over the next three years, according to data compiled by Bloomberg.
Slights found that because Gamco settled similar claims against iHeart in 2013, the fund is barred from re-litigating complaints about agreements concerning revenue handling and asset sales.
The judge also ruled that iHeart directors' decisions to use Clear Channel funds to repay the parent company's debts fell within the realm of their business judgment and weren't a violation of legal duties they owed to investors.
The case is Gamco Asset Management v. IHeart Media Inc., CA 12312, Delaware Chancery Court (Wilmington).
To contact the reporters on this story: Laurel Brubaker Calkins in Houston, Texas at laurel@calkins.us.com, Jef Feeley in Wilmington, Delaware at jfeeley@bloomberg.net. To contact the editors responsible for this story: David Glovin at dglovin@bloomberg.net, Michael Hytha at mhytha@bloomberg.net, Andrew Martin Sophia Pearson
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