April 28, 2008

JPMorgan Chase/Bear Stearns: Splicing the Delaware Issues

Tune in tomorrow for our webcast – “JPMorgan Chase/Bear Stearns: Splicing the Delaware Issues” – during which Professors Elson, Cunningham and Davidoff will analyze the novel Delaware issues presented by the Bear Stearns transaction, including addressing:

– What significant anti-takeover provisions are in the amended merger agreement?
– How does the provision work that calls for the parties to work in good faith to restructure the deal if Bear Stearn’s shareholders turn it down?
– What is the JPMorgan Chase guarantee – and how does it work? How about the NYC building option and the Section 203 provision?
– How valid are the attacks against the fairness opinions delivered in the deal?
– Why was there a discussion of a 39.5% share exchange and what would be the Delaware law on it?
– How about the abandoned, uncapped 19.9% option – was that valid under Delaware law?

To warm up for the program, check out Professor Davidoff’s analysis of the Form S-4 filed for the deal (which the SEC declared effective on Friday) as well as this WSJ article indicating that post-deal details will be announced soon.

Claims Against Clear Channel Are Dismissed in New York Lawsuit

As reported on Friday by the NY Times’ DealBook:

A New York judge dismissed counterclaims against Clear Channel Communications on Friday in a lawsuit over the funding of a $20 billion buyout of the radio station operator, Reuters reported. (Here is the complaint.)

The private equity buyers, THL Partners and Bain Capital, sued the banks in New York and Texas, seeking to force them to fund the deal. Clear Channel joined them in the Texas suit, but was not a plaintiff in the New York case. The banks had filed several counterclaims against both Clear Channel and the buyout firms.

The judge dismissed the counterclaims against Clear Channel, but said the counterclaims against the buyout firms would continue. The buyout firms must answer those counterclaims within 10 days, the judge said in the ruling. A copy of the ruling was obtained by Reuters.

“We are grateful that Justice Freedman sent our case back to Texas where it belongs,” Clear Channel said in a statement. Clear Channel had agreed to be acquired at the height of the private equity boom last year. The credit markets has changed significantly since then, causing the cost of financing leveraged-loan debt to surge.

The banks were to provide more than $22 billion financing and earn more than $400 million in fees, but they balked when the debt markets deteriorated and asked for the terms of the deal to be changed, according to a copy of one of the suits. “The banks can have their lawyers churn out as many motions and briefs as they want, but ultimately this case boils down to a simple question of right and wrong, and they will face a jury in Texas to decide that question,” Clear Channel said.

The banks, which include Citigroup, Morgan Stanley, Credit Suisse Group , Royal Bank of Scotland Group, Deutsche Bank and Wachovia, said in a statement: “We are happy that the court has ordered that the banks counterclaims against the sponsors should proceed in New York.”