Providence Says Clear Channel Lawsuit 'Baseless'
February 18, 2008 at 5:45 AM (PT)
Private equity firm PROVIDENCE EQUITY PARTNERS said on SUNDAY a lawsuit brought by CLEAR CHANNEL COMMUNICATIONS to force it to complete a $1.2 billion deal was "baseless," reports REUTERS.
Marking the latest deal to turn nasty amid the credit crunch and downturn in the economy, CLEAR CHANNEL filed a lawsuit FEBRUARY 15th, in the Court of CHANCERY, DE, to force PROVIDENCE to complete the deal to buy the radio operator's 56 television stations. The lawsuit is filed against "NEWPORT," a company set up by PROVIDENCE to make the acquisition.
This is not related to the $20 billion leveraged buyout of CLEAR CHANNEL.
CLEAR CHANNEL, being bought by private equity firms THOMAS H. LEE PARTNERS and BAIN CAPITAL PARTNERS LLC, has previously said that the buyout, which last week received antitrust approval, is not conditional on the TV sale.
But it is unlikely to add confidence to investors already concerned that the $39.20-a-share buyout could be in jeopardy, evidenced by the discount CLEAR CHANNEL's shares are trading at to the offer price. Its shares closed on FRIDAY at $32.35.
Q4: Clear Channel's Outdoor Division Passes Radio
While CLEAR CHANNEL COMMUNICATIONS' revenues rose 4% in the fourth quarter of 2007 (NET NEWS 2/14) compared to 2006, to $1.84 billion -- it was largely because of the continuing strong performance of the company's outdoor division, which rose 13% to $936.7 million. This marks the first time that CLEAR CHANNEL OUTDOOR has earned more total revenue than CLEAR CHANNEL RADIO, where revenues slipped 3% to $874.6 million.
The fourth-quarter decline in radio revenues at CLEAR CHANNEL raised concern among WALL STREET analysts that weak financial performance could derail the planned sale of the company to private equity. The secular downturn in radio comes at a particularly bad time, accompanied by a worldwide credit crunch that could make borrowing more expensive for THOMAS H. LEE PARTNERS and BAIN CAPITAL PARTNERS, the companies leading the buyout.
Analysts say the private equity firms, spooked by the weak radio results and low stock price, could still cancel the deal. By the same token, they may feel that the strong performance of the company's Outdoor division offsets the bad news from radio.