Anxious shareholders of Clear Channel Communications are likely to be jolted again tomorrow after news emerged that the radio giant sued private-equity firm Providence Equity Partners late Friday to complete a $1.2 billion acquisition of its television stations.
While the TV station deal is not a condition for closing the massive $27 billion leveraged buyout of Clear Channel, it could pose some serious challenges for the new owners, sources said.
Clear Channel’s shareholders have been rocked daily by ups and downs in the company’s stock price as skepticism has grown that the takeover would go through.
Clear Channel shares rose 7.4 percent on Friday to $32.35, amid rumors that the television deal was being finalized. However, persistent fears about whether a deal will be completed remain reflected in Clear Channel’s stock price, which is 21 percent under the deal price of $39.20 a share.
THL Partners and Bain Capital, which agreed to buy Clear Channel in late 2006, are paying what many consider to be a high price.
In October, Providence, run by media investor Jonathan Nelson, informed Clear Channel that it was thinking about renegotiating or walking away from buying the company’s TV stations.
Sources said the deal includes a reverse-break up fee, which allows Providence to walk away for $46 million.
Providence responded to news of the suit yesterday. “We are surprised and disappointed that Clear Channel would suddenly bring this baseless lawsuit,” Providence said.
Sources suggested Providence soured on the TV station deal in part because the firm was hoping to resell some of the stations to reduce debt and the credit crunch has made that much tougher to do.