The statement that the going private buyout is “expected to occur in the first quarter 2008” was repeated by Clear Channel yesterday as it announced plans to release its Q4 and full year 2007 results on Valentine’s Day. But Wall Street is extremely nervous, with the stock price falling more than 10 bucks below the buyout price of 39.20 in yesterday’s trading.
Deep Q1 expense cutting by Clear Channel (1/28/08 RBR #18) had traders again worried that Thomas H. Lee Partners and Bain Capital would be unable to find financing for the 26.7 billion bucks buyout, despite assurances from a top Lee official that the deal was still on track to close in Q1. But Wall Street was spooked again yesterday when another private equity buyout collapsed, with Blackstone Group telling Alliance Data Systems that it did not expect to complete a pending 7.8 billion buyout. Blackstone blamed unacceptable conditions it expected to be imposed by government regulators, but the view from Wall Street was that the private equity firm was just looking for an excuse to get out of the deal.
RBR/TVBR observation: Is this a sure thing or a craps shoot in Las Vegas? Clear Channel and its would-be buyers have done or said nothing to indicate that there is any problem with getting this deal closed. Rather, they have moved ahead methodically to get the ducks in a row for a closing by the end of March. But the market has priced the stock like this is a roll of the dice. You can now buy Clear Channel’s stock at a price which will give you a return of over 33% in about two months with a buyout at 39.20 by the end of March. That’s an annualized return of well over 100%. That’s an incredible deal if you believe the deal will close as promised. Obviously, there are plenty of traders who think otherwise.