I was supposed to discuss the five buyout deals most likely to fail this morning on CNBC, but WalMart reported earnings in the middle of our conversation. Plus, Jim Cramer was the loquacious guest host, which meant we were already a bit behind schedule (but he expressed sympathy for us getting cut off, which has generated all sorts of sarcastic email)… Anyway, here’s what I would have said, were things to have gone as planned (and completely uninterrupted).
“Thanks for having me on. I believe that most of the pending take-privates will get done. A lot of the detritus is already gone, and the overall pool actually stands at just a couple dozen. But since listing ‘five deals’ makes for better television, here goes:
1. Blackstone/ADS: At first, I thought Blackstone was just angling to renegotiate. Then lawsuits started flying, and both sides wound up in front of Judge Leo Strine in Delaware Chancery Court. That makes this one DOA, as Strine has become something of an LBO gravedigger.
2. Myers Industries/Goldman Sachs: Goldman has already paid the breakup fee, and can walk in mid-April. Expect Goldman to begin lacing up its Nikes, particularly given that Myers is now trading nearly 50% lower than the purchase price.
3. Clear Channel/Bain & THL: Multiple trouble signs. The first approach was made back in 2006. The sponsors severely overpaid, after succumbing to activist pressures at the boom’s peak. Oh, and the stock is trading $10 per share lower than the sale price. But insiders insist this will get done, and my bet would be that the massive breakup fee will help push Clear Channel through in the end. But I’m not certain enough to actually buy the stock…
4. 3Com/Bain: Probably going to close, unless it becomes a political football like Dubai Ports. Bain’s partner on the deal is a Chinese tech firm, and 3Com apparently makes some sensitive national security gizmos. Certain Congressmen have already raised red flags, which could lead to grandstanding, which could lead to talk radio outrage, which could lead to failure. Failure here is more speculative than success.
5. Penn Gaming/Fortress: Can’t quite understand the problem here, but it makes the list due to a $17 per share spread. Yes it still needs to pass some regulatory hurdles, but Harrah’s managed to close. Plus, this isn’t an easy deal for Fortress to bail on. But still, that spread…”