A day after Bain Capital LLC and Thomas H. Lee Partners LP increased their bid
for Clear Channel Communications Inc. to $39 a share, the media is
second-guessing the offer. Much of the rumbling stems from a Merrill Lynch
& Co. analyst report, which argues "a majority of dissenting investors
would have preferred a $40-plus offer,"
according
to TheDeal.com. Meanwhile,
PE Hub's Dan
Primack suggests why investors want more:
Whether it be Clear Channel, Harrah’s or Equity Office, LBO firms
have demonstrated that their first bid is not necessarily their best bid. More
specifically, their first bid accepted by a company’s board is not necessarily
their best bid. They might bluff for weeks or months – and Bain/TH Lee displayed
a pretty good poker face – but there is almost always some upward wiggle room.
After all, you don’t spend all those resources on a multibillion dollar
transaction, just to callously walk away over a few hundred million dollars.
But how far can Bain and TH Lee afford to go? While
Barron's
Web site suggests $42 a share, such a high offer may not afford the pair
the return they expect. Merrill calculated, however, that the buyers could
afford to pay up to $41 a share and still earn a 20% return. Either way,
unlike a game of poker where only one player can win, both Clear Channel
investors and the buyout firms can prevail in this game, but only if they can
strike the right deal. —Matthew Wurtzel
See
story from TheDeal.com
See
story from Barron's (subscription required)
See post from
PE Hub
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