Saul Sterman

Wall Street Breakfast: Must-Know News

Regarding Huntsman (HUN), see article beneath 2008 chart here:
www.crossprofit.com/vi...

As stated in article, no position was taken in this arbitrage. As the title suggests, there were just too many question marks popping up. Upon this last earnings miss, Apollo called a MAC yesterday effectively nullifying the acquisition agreement. There may NOT be a break-up fee though HUN has gone to court!

HUN should have negotiated a new price tag though the whole scenario is very problematic as certain shareholders already cashed out. This deal looks dead; funeral dance (courts) to follow.

Saul Sterman

Wachovia, Clear Channel and Fair Value Madness

Christopher Whalen insinuates that the larger Bain & Lee buyout is at risk as WB has pulled out or is going to pull out. To the best of my knowledge, WB would like to pull out of all of their prior M&A commitments but will not do so as they will be heavily penalized for years to come. Likewise, if they try to go it alone and stop playing ball with the rest of the boys on the block, they will find that they are walking down a very lonely, dark cold alley that eventually leads to a dead end.

There has never been a bank that has succeeded by ignoring the rest of the industry, only failure. Sooner or later, all the major players need to deal with each other. An unofficial boycott of WB would most certainly be far worse than taking a temporary hit on a few deals as the rest are doing.

No one is complaining about CS as they try to unload CCU deal debt by bypassing the syndication. There are rules what is permissible during hard times and what is unacceptable. Competition does exist between the banks and what CS is doing falls within the accepted norms of competition. What the author is insinuating that WB is contemplating does not adhere to the definition of competition. This would be a declaration of all out war on the rest of the industry as it undermines the very foundation that the industry is built on.

Does the general investing public know the meaning of reneging on a financing commitment without the consent of the buyers and sellers?

CCU has stated again and again that it wants the deal to close before 3/31/08. Perhaps WB promised Bain & Lee all sorts of goodies if they would be willing to back off (just guessing / no knowledge). WB has to be careful about a tortious interference suit by CCU and shareholders which could lead to another Texaco like fiasco (bankruptcy).
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" So, can the banks here simply pay all or a substantial portion of the termination fee to persuade the private equity buyers to walk?
Perhaps. The trouble is that Clear Channel in those circumstances may have a claim of tortious interference with a contract against the banks.
The mere invocation of possible liability for this tort is likely to send shivers down an M&A lawyer’s spine. In the seminal case of Pennzoil v. Texaco, Pennzoil had an alleged informal, binding contract with the Getty Oil company to purchase the company. Texaco intervened with its own proposal and in a San Antonio, Texas court Pennzoil won a $10.53 billion judgment from Texaco on a tortious interference claim. Texaco was forced to declare bankruptcy and eventually paid a lower negotiated amount of $3 billion.
And here Clear Channel is in Texas so they are also likely to sue there.
To recover for tortious interference with an existing contract under Texas law, a plaintiff must prove: (1) the existence of a contract subject to interference; (2) a willful and intentional act of interference; (3) that the act was the proximate cause of the plaintiff’s damage; and (4) that actual damage or loss occurred.
Clear Channel could allege that the bank’s actions interfered with its own buyout contract and caused a breach of that agreement. It’s an uncertain claim, but it could end up being a question of fact for a Texas jury. Given what happened to Texaco, the banks might not want to take that risk."
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See full article:
dealbook.blogs.nytimes.../

As an aside and loose connection with Judy Hughes's comment, Bain wants CCU before the upcoming presidential election. Need I spell out who the heavyweight is in Bain Capital Partners? I find it interesting that this is the first time I have seen politics and the CCU buyout connection surfacing; though it was not intentional.

Saul Sterman
Disclosure: long CCU