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.

Hershey Co. (NYSE: HSY) -- calls active on renewed Cadbury Schweppes (NYSE: CSG) chatter and Deutsche Bank report. HSY is recently up $1.26 to $46.43. CSG, the world's largest confectionery company, is in the process of an auction of its U.S. soft-drink business. The sale could net CSG as much as $16 billion, some of which the company is expected to retain to fund an expansion of its confectionery business. Tootsie Roll Industries Inc. (NYSE: TR) and HSY have been frequently mentioned as CSG buyout candidates. CSG has U.S. licensing agreements with HSY. DBAB says this about HSY: "given the weak fundamentals, we believe the Trust may now be reconsidering its position on a sale. Assuming 13x 2008E EBITDA, a bid could equal at least $55 a share." HSY call option volume of 8,849 contracts compares to put volume of 2,561 contracts. HSY September option implied volatility of 26 is above its 26-week average of 20 according to Track Data, suggesting larger risk.

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