bloggingbuyouts

Clear Channel Communications Inc. (NYSE: CCU) is going on the offensive. Affiliates of Bain Capital and Thomas H. Lee are filing breach of contract suit against the banks in the buyout deal, and Clear Channel itself joined in the complaint.

The firms are filing suit against against Citigroup, Morgan Stanley, Credit Suisse, The Royal Bank of Scotland, Deutsche Bank and Wachovia.

Some of the allegations are that banks inserted poison provisions, pretext and misdirection, and even a re-cut of the deal as they faced $2.65 billion in losses (that figure according to WSJ).

This one may be a done deal for sure now. When buyers and sellers have to start suing lenders, it is not all that frequent that those providing the leverage get forced into it.

But on the flip side, those banks should have to pay severe business penalties via a break-up fee for backing away.

Clear Channel Communications Inc. (NYSE: CCU) looks like they are just going to have to stay public. Shares closed down over 5% to $32.56 on the day but shares are down over 15% to $27.40 in after-hours trading. The Wall Street Journal has reported that the $19 Billion club-deal with private equity firms Thomas H. Lee and Bain Capital Partners LLC and their bankers is all but dead.

This has been covered here with more than skepticism as the real chances of the merger closing, usually with plenty of email responses claiming all is well.

If this deal does end up getting closed, it may get to apply for the Guinness Book of World Records for the biggest and longest merger in history. This volatility behind this merger is starting to look like a soccer match played by kindergartners on a hockey rink.

Someone please just turn out the lights and call this game a loss or a draw.

There was a large move of almost 6% today in shares of Clear Channel Communications (NYSE: CCU). There was a note that a trial is being set from yesterday, but the talk out there today was that this was soon going to be a done deal.

The truth is that this one has been like watching a soccer game and is still in the pending stage with a suspiciously wide arbitrage spread. Even after a large move up today and even with a large move from the high $20's in early February, the spread here is still huge in the deal from Bain Capital and Thomas H. Lee Partners LP for $39.20.

It is wide enough that it still should bring more questions than answers. At a $33.68 close, this one has a merger arb-spread of some 16.3 percent. That isn't as high as it has been, but it is still questionable. I have been questioning this along with other failed deals even though this one is still in the "pending" status.

There are two words come to mind here: speculation, or rumors. This one is still a head scratcher. For whatever it's worth, if this closes it may be the last or one of the last giant club deals in private equity buyout land. Every time this one is discussed, the opinions vary wildly.

The Clear Channel (NYSE: CCU) saga continues.

Clear Channel recently sued Providence Equity Partners to try to force it to complete the proposed $1.2 billion buyout of its television unit. But the two agreed last week to keep going with the deal, although with a price tag $100 million lower.

Now a new wrinkle: one of the banks financing the deal, Wachovia (NYSE: WB), is trying to back out of the deal. It has sued Providence, claiming that the new deal voids the previous agreement and frees Wachovia from its obligations in the deal. Wachovia committed to provide $450 million of financing for the original $1.2 billion deal.

It's not entirely clear why Wachovia is trying to back out. No doubt the reduced liquidity in the credit markets makes this a much less attractive deal. But as The New York Times speculates, Wachovia may be trying to escape from the much larger $25 billion buyout of Clear Channel itself. However, the tv unit deal is not related contractually to the larger deal, so escaping from one doesn't mean escaping from the other.

One thing is sure, though: buyouts are getting are harder to complete.

Clear Channel Communications (NYSE: CCU) has sued (subscription required) Providence Equity Partners in attempt to complete an agreed-upon deal to sell 56 TV stations to the firm $1.2 billion. Providence says that it is "surprised and disappointed that Clear Channel would suddenly bring this baseless lawsuit."

Interestingly, Providence is arguing that Clear Channel didn't have a right to sue them under the terms of the deal and that therefore it is under no obligation to pay the $46 million break-up fee if the deal falls apart.

Clear Channel also has a deal in place to be acquired in whole by Thomas H. Lee Partners and Bain Capital.

Nothing seems to be going well for Clear Channel as far as its efforts to get previously agreed to buyouts to close. The Lee-Bain deal has been dogged by rumors. At $32.35, Clear Channel shares trade at a substantial discount to the buyout price of $39.20.

Over at Seeking Alpha, Saul Sterman believes the buyout is a done deal. If that's the case, Clear Channel shares are a good deal here, but I wouldn't advise individual investors to speculate on something like this. Leave that game to more in-the-know arbitrageurs.

There are still a lot of good things happening at private equity firms:

• You think buyouts are dead? Bain Capital just closed on a $20 billion fund raising for another global buyout fund.
• Invesco also just closed on a $4 Billion distressed fund.
• The Midwest Air Group (AMEX: MEH) is set to close today after all approvals have been met. TPG Capital is the acquirer.

There is still activity going on in pending deals and the earnings releases:

• MBIA Inc. (NYSE: MBI) is lucky. Even after their dismal earnings it still got funded at much higher prices than the current market prices.
• Alliance Data Systems Corp. (NYSE: ADS) received numerous upgrades after beating earnings last night, and that is after suing Blackstone Group (NYSE: BX) over the likely failed merger. What a rally!
  

As far as public investing and private equity in IPO's, there is more:

• SeaCastle Inc. has pulled its IPO due to market conditions. This one was supposed to be a $2.2 Billion company after the IPO, and Fortress Investment Group owns almost the entire company.
• After earnings today, Procter & Gamble Co. (NYSE: PG) confirmed that it is spinning off its Folgers Coffee Company operations.

Interesting trading activities abound:

• A hedge fund has sent notice to Countrywide Financial Corp. (NYSE: CFC) that it is selling too cheap and it aims to make the firm seek a higher price. I bet this fund loves Doug McIntyre's "Make Mozillo Take The Bonus" piece.
  
• We have noted some scared traders worrying about Clear Channel Communications (NYSE: CCU) on whether or not its buyout was coming. Yesterday we saw 32,315 options contracts trade in the April-2008 $30 Call options, which is 3.2 million shares on a fully leveraged basis.

This is interesting and definitely worth a quick read. DealBook, from The New York Times, asks "Could M&A Help Save The Economy?"

Jon Ogg is an editor of 247WallSt.com.

For those of us who have been following the mega-deals by private equity firms, the acquisition of Clear Channel Communications (NYSE: CCU) has seemingly gone on forever. The acquisition is priced at $39.20 per share in an offer from an investment group led by Thomas H. Lee Partners and Bain Capital Partners.

In October 2007, the stock traded at $38 and it has been pulling back ever since. Upon numerous occasions this deal has been "set in stone" yet the stock still trades. An earlier acquisition offer for $37.60 had to be juiced up. At this point, the $500 million break-up fee may just be a cost of doing business for the private firms equity if they walk; that fee represents merely 15 months of interest from T-Bills on the nearly-$20 billion price tag.

Earlier this month, Michael Rainey commented on this deal over at BloggingStocks as potentially being in trouble. Shares were at $33.94 when he addressed this, and shares are down more than 5% to $29.60 today. Things haven't formally changed since then, but the Alliance Data Systems Corp. (NYSE: ADS) deal implosion yesterday brought merger-arbitrage fears to the forefront yet again.

If the Clear Channel deal were to close at the end of February or early March, this would net a 25% profit for those who play merger-arbitrage. But anyone who engages in this form of trading would tell you that a 25% "arb-spread" is highly suspect and one must be very cautious. The FCC has approved this deal, but any shareholder thinking that a $39.20 buyout today (particularly after the market sell-off and the media company bloodbath) might want to go take a strong shot of reality at happy hour.

It will actually be no surprise if the Mays family is still in charge at the end of the day. No merger should take this long. Next time we see a major club deal for billions of dollars, we might be asking how much of a non-refundable deposit was put up.

Jon Ogg is an editor for 247WallSt.com.

Someone had to put together a list of LBOs that may fall apart because the stock markets are down. Leave it to the editors of The Wall Street Journal.

Making the hit list are Clear Channel (NYSE: CCU), Alliance Data (NYSE: ADS) and BCE (NYSE: BCE).

The newspaper is stating the obvious. The market already knows the deals are unlikely to close. BCE shares trade at $34, down from at 52-week high of $44.59.

The by-products of these problems are two-fold. The first is that LBO firms have obligations to close some of these deals. That means that break-up fees or lawsuits may be on the way. Boards at these companies may have little choice if their shareholders are billions of dollars underwater.

The other factor is that trust in LBO firms will probably fall to all-time lows with public companies. Whatever happened to the "our word is out bond" stuff?

Douglas A. McIntyre is an editor at 247wallst.com.

BCE Inc. (NYSE: BCE), Canada's largest telecommunications company, announced on June 30 that it agreed to be acquired by an investment arm of Ontario Teachers Pension, Providence Partners and Madison Dearborn Partners for an announced deal price of $42.75 per share. The deal is expected to close in Q1 of 2008. BCE closed at $39.12. BCE March option implied volatility of 21 is above its 26-week average of 16 according to Track Data, suggesting larger risk.

Clear Channel Communications (NYSE: CCU) closed at $35.30. Thomas H. Lee Partners and Bain Capital are expected to close on their $39.20 cash bid for CCU in early 2008. CCU option implied volatility of 35 is above its 26-week average of 19 according to Track Data, suggesting larger risk.

Daily M&A Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.

Time can be the enemy of buyout deals. It gives the parties more time to think about things -- or get frustrated. Just look at what happened with the Harman International Industries, Inc. (NYSE: HAR) implosion.

But, in the case of the buyout of Clear Channel (NYSE: CCU), the deal somehow appears to be mostly complete (the process took about 10 months). That is, today the company announced that its shareholders approved the transaction. As a result, the company's buyers -- Bain Capital Partners, LLC And Thomas H. Lee Partners, L.P. -- will become the new owners of the radio powerhouse.

In fact, during the buyout process, Clear Channel increased the price tag two times. There was also another interesting feature added along the way; that is, the shareholders have the right to roll over some of their equity into the private entity.

But, ultimately, the key takeaway is that radio has proven to be quite resilient. Despite competition from satellite providers and the Internet, the fact remains that traditional radio continues to be a big part of people's lives -- and more to the point, a nice cash-cow business.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements

Lately, we've seen some considerable pushback from major shareholders on private equity deals. Yes, these investors want to maximize their returns. In fact, key investors like Fidelity have a fiduciary responsibility to do so.

As a result, we are seeing a tug-a-war and shareholders seem to have an edge. Just look at the Clear Channel (NYSE: CCU) deal. Despite two increases in the bid, the buyout deal still had to be delayed and may not get done.

There's an excellent piece on this in Bloomberg.com. Basically, the focus is on the mighty Fidelity, which has $1.4 trillion in assets. Yes, that's a lot of leverage.

This does not mean deal activity will diminish. There's simply too much money in private equity funds (that is, they get paid by putting money to work).

Rather, it's good news for individual shareholders who -- over the years -- had little choice but to leave money on the table.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

The board at Clear Channel Communications (NYSE:CCU)has been complaining about the 26 billion dollar to take the company private, and now Bain Capital and Thomas H. Lee Partners may be sweetening the deal. In a letter the directors, the suitors offered to let current shareholders retain a small stake in the company after it is taken private.

This process, known as a stub, is a good idea. If the company's board is right in saying that the 26 billion dollar offer isn't generous enough, the company's shareholder can profit from the success of the private company, If it turns out that the 26 billion dollars was too generous, the shareholders won't make any money from the stub. Fidelity Investments and several other significant shareholders had previously said they planned to vote against the deal. Perhaps the prospect of retaining a stake in the private company will change their minds.