Do the "stub equity" components of the recent Harman and Clear Channel buyouts in the U.S. herald a new era in North American private equity transactions?
In recent weeks, two U.S. buy-out offers made by KKR/Goldman Sachs and Bain Capital/Thomas H. Lee Partners, respectively, have contained an innovative offer structure that may herald a new era in North American private equity transactions. In each, the transaction was structured as an all-cash offer, but with the target shareholders being offered the chance to take a minority interest in the acquiring company, and thus an opportunity to share in any profit on a subsequent sale or IPO of the target company. Under the terms of the offers, the current public shareholders could end up holding as much as 27% and 30%, respectively, of the new companies. In each case, the share portion of the transaction is optional and current shareholders can elect to receive only cash, a combination of cash and shares, or all shares (with the share
