Private equity firms have begun to walk away from transactions to take a public companies private. In tight credit markets and facing a slowing economy, deals that looked good in early 2007 don't look so hot now. In most cases the public company boards try to keep deals from breaking apart by lowering their asking price. Sometimes they take a break-up fee and allow the buyer out of its obligations.
Clear Channel Communications Inc. (NYSE: CCU) won't take any of those "let the fish of the hook" routes. It has a deal with Providence Equity to buy its TV stations for $1.2 billion. The transaction was announced ten months ago and has not closed yet.
According to The Wall Street Journal (subscription required), "Clear Channel is suing Providence for 'specific performance,' a legal term which typically addresses the ability of the seller to force the buyer to complete a deal agreement."
Market observers and the press say that many banks and buy-out firms are being advised by their attorneys to turn their backs on transactions instead of getting burned by deals that have begun to look too rich between signing a buy-out agreement and actually closing. Clear Channel is willing to gamble that it can win its case for closing a deal in court.
Douglas A. McIntyre is an editor at 247wallst.com.
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Reader Comments (Page 1 of 1)
2-17-2008 @ 9:32AM
BizIntel said...
This is certainly an interesting situation. According to the article, this is separate from the Thomas H. Lee Partners / Bain Clear Channel buyout deal (which also seems to be in question based on the current state of the credit markets). I have a feeling this will end like the United Rentals / Cerberus buyout deal - Providence will likely pay the $46MM breakup fee and be done with it.
Cheers,
BizIntel
http://www.evaluatingstocks.com