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A clear decision?



April 14, 2008 – Comments (2) | RELATED TICKERS: CCU

I followed the Finish Line/Genesco/UBS thing with some interest (I bought call options in GCO), so I feel like I know pretty well how these buyout lawsuits go. You make a deal, you break your word and reneg on your contractual obligation, you whine about it to a judge, who is procedurally obligated to let you go on whining for approximately 3,482 years, and then the counterparty drops the subject, like a better-raised child confronted with a brat and an injudicious adult.

This is going on in a buyout of Clear Channel offered by some private equity group, who inked a deal with a about a zillion lame banks to provide financing. The difference between this and the Genesco thing is that the buyer actually wants the deal to happen (whereas Finish Line was with UBS in trying to weasel out). So the LBO folks are actually joining Clear Channel in suing just about every large bank on the planet, which initially all banded together to finance this deal back in those halcyon days of everyone making approximately 5.1 zillion dollars in every buyout deal you could imagine, and now are banded together to slither out of their obvious contractual obligations.

From what I read, it seems that the banks have some of the best (i.e. slimiest) lawyers to aid them in their quest to pervert justice for their own benefit. However, even the slipperiest lawyer needs something along the lines of a case, precedent, or at least a glove that does not fit. There is no case, no precedent... nothing but their John Hancocks all over a contract to provide financing. And this is New York, not Uzbekistan.

It seems that skepticism about the timeliness of a court decision is the only strong reason not to buy, but with a deadline of June 12 in the contract, the poverty of the banks' case, and the ability of Clear Channel and the LBO firm to afford good lawyers, I think >25% off the agreed-upon buyout price ($39.20, vs today's price of $29), two months before the scheduled deadline, is overdoing it. I'm buying Clear Channel (CCU) in my Roth, hoping to sell for a 30% gain by mid-June.

2 Comments – Post Your Own

#1) On April 14, 2008 at 12:13 PM, Gemini846 (34.30) wrote:

Clarify that last paragraph for me. You think no matter what the banks do the deal will get done. Where do they get the money?

You think that the original BO price will be reduced by 25% to get the deal done?

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#2) On April 14, 2008 at 3:26 PM, FleaBagger (27.55) wrote:

I think setting aside a valid contract for no reason and finding in favor of the banks would take a lot more corruption than even the courts would feel safe indulging. 25% off of the agreed-upon buyout price is where the current price sits, so it would be a 33% gain if you buy the shares now and sell for the agreed-upon buyout price.

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