It is not official, but the odds that the buyers of Clear Channel (CCU) will walk on the deal are probably north of 99%. The total value of the buy-out is $19.5 billion. According to the FT "scepticism that Thomas H. Lee and Bain Capital will go through with their purchase on the original terms has been fed by the falling share prices of comparable companies."
The break-up fee for the deal is $500 million.
There is every reason to think that Clear Channel’s earnings will be hurt in a weak economy. Outdoor and radio advertising are already being eaten into by interent marketing budgets. A recession would simply accelerate that. Bankers don’t want to put money into industries that are slowly falling apart, particularly those that do not weather bad economic times well.
In the last quarter, Clear Channel had operating income of $432 million on just over $1.7 billion in revenue. That means an annual operating income run rate of $1.6 billion to cover a $19 billion deal.
That math may work well in a robust climate, but, if radio spending drops operating income could shrink fast.
Douglas A. McIntyre
ALERT: Today Could Be Your Best Shot At Early Retirement (Sponsored)
If you want to retire before 65, pay attention. Study after study has shown that the longer you stay invested, the better your chances at an early retirement.
Every day that goes by without saving and investing for tomorrow means more to earn and save later. Don’t waste any more time and get started with Robinhood today. The app makes it easy to buy and sell stocks, mutual funds, trade options, and even cryptocurrencies.
Sign up today — click here to start your journey.
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.