County judge in Texas rules for Clear Channel; BCE buyout deal seen on track; Tech stocks track lower

By Paul A. Harris

St. Louis, March 27 - Clear Channel Communications Inc. shares closed nearly 10% higher on Thursday after news of a Texas court ruling favoring the proponents of the leveraged buyout of the company by Bain Capital and Thomas H. Lee Partners..

In a press release Clear Channel commended presiding District Court judge John D. Gabriel of Bexar County, Tex., for awarding a temporary restraining order in favor of Clear Channel on Wednesday evening.

"Judge Gabriel carefully considered the claims made in our lawsuit, and clearly recognized the importance of the banks' agreement and duty to provide debt financing to the merger of the company with CC Media Holdings, Inc. He found in favor of Clear Channel's claim that irreparable harm would result if the banks were not immediately enjoined from tortiously interfering with the merger agreement.

"Accordingly, judge Gabriel ordered that the banks, among other things, must not interfere with or thwart consummation of the merger agreement refusing to fund it, by insisting on terms that are inconsistent with the commitment letter, or by refusing to act in good faith in the drafting of definitive loan documents.

"We are pleased that the banks and the purchasers will now be able to move quickly to complete the loan documents and fund the merger."

The defendants, however, aren't going for the "10-gallon hat" look.

Later in the day they filed a notice of removal in the Texas suit, indicating: "Plaintiff CC Media has been fraudulently joined in the action for no purpose other than to engage in improper forum shopping and to attempt to defeat the diversity of citizenship that exists among plaintiff Clear Channel and defendants."

A hearing, set for April 8 in San Antonio, will be randomly assigned among five or six judges at the docket.

"Right now everybody in this deal seems to be suing everybody else," a capital market source quipped, when asked whether the lawsuit truly represents a new beacon of hope for the deal.

Clear Channel (NYSE: CCU) shares closed the Thursday session at $29.60, up 9.96%, or $2.68 per share.

However Thursday's closing price is $9.60 below the $39.20 per share tender price.

Banker sees no BCE carryover

An early Thursday message from a special situations equities analyst suggested that investors are perhaps becoming concerned that the "reticent lender syndrome" which has dogged the Clear Channel deal will create headwinds for the C$51.7 billion buyout of BCE Inc. by an investor group led by Teachers Private Capital, the private investment arm of the Ontario Teachers Pension Plan, Providence Equity Partners Inc. and Madison Dearborn Partners, LLC.

However a banker close to that deal told Prospect News that the only thing that the two transactions have in common is that the groups of lenders in both cases are led by the same two banks: Citigroup and Deutsche Bank.

"BCE is a fully committed deal, and I don't see that changing," the banker said.

"There is nothing to indicate that any of the lenders are taking a different view."

BCE shares (NYSE: BCE) closed 3.54% higher on Thursday, up $1.24 to close at $36.27.

In other news about the deal, the Canadian Radio-television and Telecommunications Commission gave its approval to the buyout, as had been widely anticipated.

The banker said that the only potential negative impact that remains stems from a bondholders' lawsuit asserting that the buyout violates conditions in the bond indenture.

Although a Quebec judge dismissed the case earlier this month the banker noted that the bondholders have appealed that ruling.

Tech sector: Caution ahead

All three major U.S. indexes gave up ground on Thursday.

The Dow dropped 0.97%, or 120.4 points, to close at 12,302.46.

The S&P 500 surrendered 15.37 points, or 1.15%, to close at 1,325.76.

The Nasdaq, meanwhile, sustained the sessions biggest loss, 1.87%, and closed at 2,280.83, 43.53 points lower.

Nasdaq component Oracle Corp. significantly underperformed the index, losing 7.21% on the day to close at $19.43, down $1.51.

An analyst who covers the sector told Prospect News that there were foreboding details ensconced in what otherwise appeared to be an upbeat earnings report which the company delivered on Wednesday night.

At issue, said the analyst, is the 7% growth which Oracle reported in sales of new licenses for business applications.

"It came in below what people were expecting - not by a lot, but by about $50 million," the analyst said.

"It indicates that the environment out there is tough."

Thursday also produced news that BEA Systems, Inc. won approval in Delaware Chancery Court for a stockholders' vote on Oracle's bid to acquire BEA Systems.

The vote is scheduled for April.

In January, Oracle announced it would acquire all outstanding shares of BEA Systems for $19.375 cash per share in a deal valued at about $8.5 billion, or $7.2 billion net of BEA Systems' cash on hand of $1.3 billion.

Affiliates of Carl C. Icahn holding 13% of BEA Systems' common stock agreed to vote in favor of the merger.

The tech equities analysts told Prospect News on Thursday that there appears to be nothing holding the deal up at this point.

On Wednesday BEA Systems filed a pre-merger notification with the European Union for the Oracle deal. Phase one is expected to be complete by April 30, barring any proceedings initiated.

BEA Systems (Nasdaq: BEAS) were fractionally higher in Thursday trading, up 0.37%, or seven cents, to close at $19.12.

Elsewhere, however, the tech sector produced a generous amount of red ink on Thursday.

Adobe Systems Inc. (Nasdaq: ADBE) dropped by 4.09% to close at $35.68, off $1.52.

Intel Corp. (Nasdaq: INTC) gave up 3.52%, or $0.77 per share, to close at $21.09.

Sun Microsystems, Inc. (Nasdaq: JAVA) ended 3.4%, or $0.56, lower at $15.91.

Microsoft Corp. (Nasdaq: MSFT) gave up 1.79% to close at $28.05 per share, off $0.51 on the day.

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