For the private equity space, it's been a mixed bag this week. The good news is that the $17.1 billion acquisition of Harrah's Entertainment got done (the largest casino deal in history). The buyers included TPG and Apollo Global Management LP.
But there was some bad news too -- it looks like Blackstone (NYSE: BX)'s proposed buyout of Alliance Data Systems (NYSE: ADS) is on the rocks.
So, in this environment, it's understandable that Wall Street is jittery with buyout deals. Just look at the pending buyout of Clear Channel Communications (NYSE: CCU).
Despite reassurances from the private equity sponsor -- Thomas H. Lee – the deal still has an enormous spread. In other words, the buyout price is $39.20 and the current market price is $29.69.
What's going on?
Well, investors should be concerned. Besides the ADS transaction, there have been other deals that have imploded – such as United Rentals (NYSE: URI), SLM (NYSE: SLM) and Harmon (NYSE: HAR).
What's more, the slowing economy is likely to negatively impact marketing spending, which should be a drag on radio. Clear Channel has already talked about this.
Besides, the credit markets are still tight, making it difficult to raise large sums for buyout transactions.
True, Clear Channel still has strong competitive advantages and it looks like there is room to cut costs, but right now, Wall Street traders certainly are not in a risk-taking mood.
Tom Taulli is the author of various books, including The Complete M&A Handbook
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Reader Comments (Page 1 of 1)
1-29-2008 @ 4:01PM
Donna said...
Thomas E. Lee and Romney's Bain Capital are the private equity buyers of Clear Channel Communications.
Clear Channel owns Premiere Radio Networks which owns the syndication rights to the Rush Limbaugh show, Glenn Beck, and many others. Clear Channel has a lucrative contract with Sean Hannity to air his program on 80 of their stations through 2010. In addition, nearly every talk radio host in American relies on Clear Channel stations for a large portion of their audience.
How does a Governor from Massachusetts, where only 12-13% of the registered voters are Republicans, get a reputation of being conservative? Especially with a liberal record. See documentation of Romney's record at www.massresistance.org/romney/
I believe that the conservative media, Rush Limbaugh, Sean Hannity, Ann Coulter, Michelle Malkin, Rich Lowry, Hugh Hewitt, and others have perpetuated a false idea, i.e. the idea that Romney is conservative. Their scrutiny of Huckabee and McCain's conservative credentials has been emotional and full of highly charged, derogatory terms, while they have been silent about the holes in Romney's "conservative" credentials.