Leveraged buyouts are back in the news. For those who thought that they had seen the last of this phenomenon with the failure of megadeals like the Federated (NYSE: FD) fiasco in the late '80s, there is a sense of deja vu in the new wave of buyouts, funded largely by private-equity investors. In recent months, we have witnessed the buyout of HCA (NYSE: HCA) for $21 billion, and we've been privy to rumors of buyouts from firms as large as Time Warner (NYSE: TWX) to those as specialized as RadioShack (NYSE: RSH).
I am sorry to break it to you but TWX is indeed too large for a leveraged buy out. Depneding on how you look at it HCA was the largest of all time with a market cap of around 22 Billion. TWX is close to 70 Billion, I don't even wanna guess how much debt it's carrying, an offer would have to be more than 10% higher to really get any interest and even then it's highly unlikely the board would let this happen. As a shareholder I wouldn't accept anything under $24. Maybe this is wishful thinking on your part or maybe you just don't realize the real size of TWX but I wouldn't hold my breath if I were you cause it will never happen. Why would you want one anyway? A leveraged buyout means that the shareholders don't get the benefit of the true breakup value of the company, whoever bought it gets that benefit. In an LBO I'd say TWX shareholders would get cheated out of the value we all know is there.
Anyway, I am pleased with the performance TWX has been showing over the last week or so, it's acting strong in a bad market and seems to be setting up to go back above 17. A good quarter showing advertising revenue at AOL increasing significantly would be a strong positive for the stock. Be patient.