Almost every week now a private equity or hedge fund walks away from a transaction to take a public company private. In most cases the public company boards try to keep deals on track by lowering their asking price or they take a break-up fee and allow the buyer to walk away.
There will be none of the kid gloves stuff at Clear Channel (NYSE: CCU). It has a deal with Providence Equity to buy its TV stations for $1.2 billion. The transaction was announced ten months ago and has not closed, which is hardly a good sign.
According to The Wall Street Journal "Clear Channel is suing Providence for "specific performance," a legal term which typically addresses the ability of the seller to force the buyer to complete a deal agreement."
As far as market observers can tell many banks and buy-out firms are being advised by their attorneys to turn their backs on transactions instead of getting burned by deals which have begun to look to rich between signing a buy-out agreement and actually closing. Clear Channel is making it clear that walking may have a very high price.
Douglas A. McIntyre
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