The $19.5bn (£9.7bn) private equity takeover of the US radio giant Clear Channel Communications, one of the biggest buyouts of the credit market boom, was last night teetering close to collapse amid disputes over its financing.
The deal was first announced in November 2006, before the credit market meltdown made such large leveraged buyouts impossible to arrange, and the banks that promised funding have since cooled. Eleventh-hour talks to save the deal have failed to resolve key details, it was reported yesterday.
The private equity buyers – Thomas H Lee Partners and Bain Capital – set a 31 March deadline for closing the deal, but milestones in the arrangement of financing have been delayed repeatedly over the past few weeks.
The banks that originally promised to lend up to $22bn to pay for the acquisition and the refinancing of existing Clear Channel debts include Royal Bank of Scotland, Citigroup, Morgan Stanley and Deutsche Bank. All have suffered big losses on their loans to other private equity buyouts, which have proved hard to sell on to beleaguered credit market investors.
Some analysts predicted a deal could still be done and that both sides are engaged in last-minute brinkmanship, but Clear Channel shares plunged in after-hours trading. Having fallen 6 per cent during the day, as rumours that the deal was in trouble began to circulate, they were down an additional 22 per cent after The Wall Street Journal quoted a source close to the negotiations saying: "No one wants to do this deal apart from the seller."
The stock was trading last night at $25.60, far below the $39.20 promised by Bain and Thomas H Lee.
The collapse of the deal would be a financial blow to Lowry Mays, who founded the company with the purchase of one San Antonio radio licence in 1972. He and his sons, Mark and Randall, stood to net more than $1.3bn from the sale, and would have continued to run the company in the private arena.
The Mays family grew to dominate the US radio market thanks to an acquisition spree in the wake of the 1996 deregulation of the industry, since when Clear Channel bought more than 70 companies. Its scale and market power has brought with it criticism, and most recently the company has been fighting accusations of pursuing a right-wing agenda. It syndicates the right-wing shock jock Rush Limbaugh and some of its stations banned Madonna and Dixie Chicks records after they made anti-war comments.
Thomas H Lee and Bain agreed a break-up fee of $600m which would be triggered by the collapse of the deal, but such fees have not been a barrier for other private equity firms that have got cold feet over highly-indebted buyouts since the credit crisis began. The biggest deal to have been abandoned so far was the $25.6bn buyout of Sallie Mae, the student loans provider.Reuse content