Monday, February 18, 2008
Radio: Clear Channel's Buyer's Morose
This wasn’t supposed to happen.
It looks like still another deal’s going south for the Mays family.
On Friday, Clear Channel filed a complaint against Newport Television, a subsidiary of Providence Equity Partners, for backing out of a $1.2 billion deal to buy 56 television stations.
To avoid tipping off Wall Street, the filing was done late Friday afternoon in Delaware Chancery Court.
According to the complaint, “Newport has no right to walk away from this deal. Buyer’s remorse is not Clear Channel’s problem.”
I’ve said it before and I’ll say it again. When one realizes it’s best to back out of a deal with Clear Channel it’s buyer’s morose.
Providence would rather pay $46 million to kill the deal than get stuck with Clear Channel’s underperforming properties.
Even worse for Clear Channel – that $46 million could end up a write-off for Providence.
The deal was put together last April – but reality reared its ugly head – and Providence came to grips with the fact that the cash flow multiples just didn’t add up in this brave new world of 2008.
The Wall Street Journal revealed that Clear Channel had attempted an under-the-radar eleventh hour “prices slashed” renegotiation – but Providence opted to walk. Clear Channel pathetically told the Journal, “The private equity firm wasn’t serious about completing the transaction.”
This doesn’t fare well for deal of doom – the $19.5 billion buyout of Clear Channel by BainCapital and Thomas H. Lee - getting done by their mid-March deadline – if ever.
If Clear Channel gets stuck with those 56 TV’s they’ll be forced carry those properties into the Bain/Lee buyout, which will critically alter the distressed deal.
And should it ever, ever, ever close it won’t be even close to that inflated $39.20 share price.
Since Wall Street is off for the holiday it gives the banks caught up in this mess a day to ponder their impending disaster.
Bain/Lee has to rethink this one, too. Even a python’s digestive tract has a threshold.
The poor Mays family. They set up a week of manipulation and maneuvering, calling in every favor, to goose their stock back into the 30’s – and got it closed on Friday at 32.35. It had traded over 30 million shares on Friday – triple the average volume for that troubled stock.
Now, those Friday arbitrageurs have to feel screwed, blewed, and tattooed.
That seems to be the end result for anyone trying to do a deal with Clear Channel these days.
12:21 PM update –
It gets better.
Reuters reported that Providence Equity Partners responded, calling Clear Channel’s lawsuit “Baseless.”
They’ve also told Clear Channel that if they’re expecting that $46 million back-out payment – fugghetaboutit!
Here’s what Providence said: "The contract clearly states that if all the conditions to closing are satisfied and the buyer does not perform, Providence's sole obligation is to pay the $45.9 million reverse break-up fee," the Providence spokesman said. "Furthermore, under the terms of the contract, this fee is no longer payable because Clear Channel has commenced this litigation."
You’re Mark Mays and you feel like a jilted suitor – again.
How many deals can’t he close?
Just falling short of admitting defeat, Clear Channel issued an e-mail statement reading, “…if for some reason the deal does not close, we would look forward to keeping these terrific assets in the Clear Channel family."
You’re Mark Mays – and you don’t have a choice.
Those terrific assets are yours to keep.
Who’d want them? Tarnished, distressed merchandise?
Terrific? Didn’t you mean terror-ific?