Clear Channel Communications Inc., the largest radio operator in the United States and billboard mega head, took a major hit Tuesday, when their stock fell more than 20 percent in trading. When word broke that the radio broadcaster’s $19.5 billion buyout may fall through, their shares dropped to $25.82, a far stretch from the $39.20 per share buyout shareholders were expecting to receive.
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Clear Channel Communications Inc., the largest radio operator in the United States and billboard mega head, took a major hit Tuesday, when their stock fell more than 20 percent in trading. When word broke that the radio broadcaster’s $19.5 billion buyout may fall through, their shares dropped to $25.82, a far stretch from the $39.20 per share buyout shareholders were expecting to receive.
The Wall Street Journal was the first to report on their website Tuesday that the private equity firms, Thomas H. Lee Partners LP and Bain Capital Partners LLC leading the buyout were having difficulty reaching a consensus with the banks set up to finance the deal. The main reason is that funding the deal where it is set now, offering $39.20-a-share would actually cost more money due to the declining value of the dollar and the LBO loans rate. The excess would add up to something like $3 billion.
“Private equity refused to bend on price from $39.20 and the lending syndicate isn’t convinced Clear Channel will generate enough cash flow to cover the debt,” David Miller, an analyst with SMH Capital in
Los Angeles, said in an interview. “Radio values have compressed. This deal looks a lot more expensive now.’”
If talks fail, the deal, rumored to be the largest pending buyout in the
U.S., may end up being decided by a court. However, according to an unknown source interviewed by The Associated Press, Lee and Bain Capital Partners LLC are planning to fulfill their end of the deal under means necessary to bring a resolution.
UPDATE! UPDATE!
The Wall Street Journal is now reporting that Bain Capital and Thomas H. Lee, the private equity firms behind the Clear Channel buyout, have filed a pair of lawsuits–in
Bexar County, Texas, and in the New York State Supreme Court–against the lending banks involved in the deal. The suits name Citigroup, Morgan Stanley, Credit Suisse, The Royal Bank of Scotland, Deutsche Bank and Wachovia, charging that the Wall Street banks have breached a contract to help fund the deal.
Analysts suspect that these suits could be the nail in the coffin of what was, up until today, an almost done deal.
