- Any LBO escape routes?
Let's start off by noting that it's a week before Labor Day weekend and there's not much news going on - the perfect time for reporters to stir up trouble where none might exist. OK, that's settled - now onto the buzz. It's coming from the WSJ's chief M&A reporter, Dennis Berman, who says on Deal Journal that lawyers of all stripes are swarming over the troubled Home Depot deal. This is the one that has three private equity firms buying Home the chain’s wholesale supply business for $10.3 billion. It's one of those deals that should go through - credit crunch or no - because the financing folks (JPMorgan, Lehman and Merrill) are contractually obligated to make the thing happen. But… Here's the situation, as explained by Berman:
The banks’ lawyers are trying to find every way possible to back out of the transaction. Given the contracts already in place, this is very difficult to do. But the banks see they have some wiggle room (and it’s probably more true at HD Supply than for most any other deal) given how rapidly the housing markets have deteriorated. But the banks are in a very fraught position. Not only do they stand to be sued by their own best clients, but also by Home Depot. The theory is that Home Depot could claim the banks exerted “tortious interference” in their deal with Bain Capital, Carlyle Group and Clayton, Dubilier & Rice.
Since this is a legal blog, I need not remind you that tortious interference occurs when a person intentionally damages the plaintiff's contractual or other business relationships. It might happen if, let's just say for arguments sake, a bank tries to talk a client out of fulfilling a contract to buy a company. Not that this would be taking place with the Home Deal agreement or any of the other LBO deals hanging in the wind. Not at all.
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| 12:40 PM Aug 24, 2007 | Email the Daily Dragon | Email this Article | Post Comments |
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