Clear Channel tries to put some pep into PEP


The deal to take radio giant Clear Channel private will be much easier to accomplish if the side deal to send CCU’s television group to Providence Equity Partners closes first. Rumors have floated questioning the status of the PEP TV deal, but it seemed a step forward had taken place when PEP filed with the FCC to place some of the stations under a trusteeship, basically setting up a temporary home for properties facing local cap issues in advance.
That seemingly p
ositive move has been counterbalanced with news that CCU is suing to force PEP to quit dragging its feet and get the deal done, as reported by the Wall Street Journal. The television group was sold to PEP for 1.2B, a price that, like many others, seemed OK at the time but looks a little steep under current economic conditions.

According to WSJ, Clear Channel has indicated its willingness to offer a discount, but a proposal from PEP was called unacceptable. So CCU is using a “specific performance” suit to force closure for the agreed-upon price and legal expenses. WSJ says the breakup fee, should PEP pull out instead, is 46M. The deal dates back to late 2006.

TVBR/RBR observation: Deal-making in the near future will have the benefit of a healthy injection of reality. Traders on both sides of the table will understand that valuations have taken a hit, and prospective buyers will have an added crowbar to pry loose concessions from reluctant sellers – the fact that nobody really knows where the bottom is yet. That is no help to these slow-moving megadeals, which take on valuation hits at a pace much faster than the pace that the lawyers and bankers can maintain.