Clear Channel becomes latest LBO to extend closing

Bain Capital and Thomas H. Lee Partners have joined the latest LBO trend: extending the closing dates for megabuyouts negotiated prior to current credit market dislocation. The private equity firms yesterday pushed the deadline for their $27.5 billion buyout of US media company Clear Channel Communications to 12 June 2008. The agreement had previously stipulated that any party could walk away from the buyout if it was not completed yesterday.

Providence Equity Partners, the third private equity firm in the buyout consortium, was not mentioned in a statement announcing the extension. Last month Providence sent Clear Channel a letter informing the company that it might drop its $1.2 billion share of the bid. A source familiar with the deal said Providence’s indecision is motivated by Clear Channel’s “poor performance” since the deal was signed. The source said that Providence has not yet made a final decision, but if the firm does walk away from the deal, it will have to pay a $45 million breakup fee.

The consortium has been fighting to buy the company since last December. The group sweetened its offer three times, from $37.60 per share up to $39.20 per share. Clear Channel’s board first rejected the final offer, and then reversed its rejection. The deal also briefly came under Congressional scrutiny when two members of the House of Representatives asked the Federal Communications Commission to determine if buyouts in the media and telecom sectors conflict with US media ownership rules.

Clear Channel’s shareholders voted in favor of the deal in September, and then significantly oversubscribed to a 30 percent stub equity stake offered by the private equity firms as a part of the deal.

Separately, Goldman Sachs’ private equity arm, GS Capital Partners, last week extended the buyout deadline for its $1 billion acquisition of polymer manufacturer Myers Industries from 15 December to 30 April 2008. GS Capital Partners agreed the deal in May, but has asked for more time to “further evaluate conditions in certain industries in which Myers operates”. The private equity group acknowledged that no material adverse change had occurred in Myers’ business.

In exchange for the extension, GS Capital Partners agreed to pay a non-refundable $35 million fee. And to secure the extension of debt financing commitments from Goldman Sachs Credit Partners and Key Bank, GS Capital Partners will contribute an additional $30 million of equity to the deal.