Now that the Board of Directors at Emmis Communications has endorsed the bid by CEO Jeff Smulyan and Alden Global Capital to take the company private at $2.40 per share, the next step is to ask the public shareholders to tender their shares for the payout. That is going to come quickly – next week, to be precise.
The merger agreement filed with the SEC to have Emmis acquired by JS Acquisition, the new entity created by Smulyan and Alden, requires the tender offer to commence no later than 5:00 pm New York time on June 3, 2010, which is next Thursday. The tender process is to take at least 20 business days, which would make the earliest possible completion date July 1.
When the buyout closes and Emmis is merged with JS Acquisition, all common stock shares owned by Smulyan/Alden, including those acquired in the tender, will be exchanged for their interests in the new parent company and canceled. Any shares not tendered by the public will be converted into the right to receive payment of $2.40 per share.
The existing preferred stock owned by Alden will be converted into new notes at a rate of $30 principal amount for each $50 of liquidation preference of existing preferred stock.
Preferred shares still held by entities other than Alden will be converted into the right to receive $5.85 and six-tenths of a cent per share. Thus, holders had better not be asleep at the switch and miss the concurrent tender to convert their outstanding 6.25% Series A Cumulative Convertible Preferred Stock to new 12% PIK Senior subordinated Notes due 2017 at a rate of $30 face value of the new notes for each $50 face value of the preferred shares. Those preferred shares have lately traded at around $24, up from a recent low of $13.54 in March before the announcement of the going private bid.
RBR-TVBR observation: What could go wrong? The going private buyout can be called off by mutual agreement of JS Acquisition and the Emmis board, subject to approval of the special committee of independent directors. It can also be called off by either JS Acquisition or the Emmis board if the tender hasn’t been completed by September 24 or there is a legal or regulatory block to closing in effect. It can also be called off by JS Acquisition if the Emmis board changes its recommendation that shareholders accept the offer or breaches the agreement. None of those things are likely to happen, although there are lawsuits pending by shareholders who claim they are being shortchanged.
No date has yet been set for a shareholders vote, but Emmis Communications has filed a preliminary proxy with the SEC for the vote on whether to sell the entire company to CEO Jeff Smulyan, who has backing from Alden Global Capital.
The buyout had been delayed by SEC staff questions about documentation for a related exchange offer for Emmis’ preferred stock. Those amended documents have now been filed and it appears that it is all systems go for both tenders to wrap up on June 29th.
The shareholders meeting is really just a formality as far as holders of Class A common shares are concerned. As noted in the preliminary proxy, Smulyan’s super-voting Class B shares give him about 60% of the voting power and the shares owned by Alden add another 1.7%. “Therefore, the Proposed Amendments will be approved by the holders of the Common Stock,” the document notes.
However, the proposed amendments to Emmis’ articles of incorporation also need approval by the preferred holders. The company is using bold face type, underlined, to make it clear to preferred holders that just tendering for the exchange offer does not constitute a vote for the amendments, so they are being urged to return their proxy voting cards. Approval by two-thirds of the preferred shares is required.
As for the offer by Smulyan to buy out all other shareholders at $2.40 per share, the SEC filings reported that 1,335,101 shares had been tendered as of Wednesday, June 30th. In all, he is trying to add 29,722,866 shares to the ones he already owns for a total of 32,910,753.
The SEC filings note that the number of lawsuits filed by shareholders claiming that they are being shortchanged by the deal now stands at seven – six in Indiana state courts and one in US District Court.
Well, I think its time to put away those stupid lawsuits. Since the deal was first announced, on April 25th before the open, valuations of Radio Companies have contracted dramatically.
ROIAK on 4/23 close = $5.04, now $1.21
CMLS on 4/23 close = $5.13, now $2.72
ETM on 4/23 close, $14.86, now $8.35
EMMS on 4/23 close = $2.30, now $2.20.
I'd be real happy to get the $2.40 for EMMS. Actually I only have a little left caise I sold 80% at $2.30 recently. And with the complete 180% change in the Radio Sectors momentum since the announcement, and the economy not too hot, I'm considering dumping the rest in case the the buyers back out.
I mean lets face it, without the buyout offer, EMMS would probably be back to $1.20 or less. I mean I'm believe the deal will go through, but the collapse of radio stocks has to make it a little more risky. Heck, ROIAK has come down like 33% just in the past week.
I have scottrade and received an e-mail from them saying I had to call to accept the offer on my preferred shares. But when I call, they say they know nothing of an offer. It is probably just a notice. I am afraid I am going to loose out on a lot of money. Has anybody else had this problem?
Good point, waiting for a few more cents would be more about principle then profit. If I were losing $$ I'd stick it out, but I'd do OK as is, so maybe I should throw in the towel and move on.
I hope there is justice for all those getting screwed by Jeffy. I also hope that when this jackass tries to take this company public again in a year or 2, folks are wise enough to avoid at all costs, I know I am.
The tender offer is scheduled to expire at 5:00 p.m., New York City time on Tuesday, June 29, 2010, unless extended in accordance with its terms.
I would expect the funds to be delivered by end of summer or earlier baring any roadblocks.
You did read the stuff they mailed you?
Don't forget to factor in time lost. In my situation, I averaged down when the price was under 50 cents. The offer is a bit above my cost basis so I am ready to kiss this investment goodbye at a slight gain. I don't wish to postpone the buyout another year for the promise of a few more cents.
I joined a class action suit on another stock that involved GACC which was bought out by Conseco and they paid pennies on the dollar for the stock. The suit was thrown out on Summary Judgment in favor of Conseco (go figure) but afterwards we were paid the offer amount for our stock. It just boils down to if you are lucky and prevail you may receive a higher price. If not, you will probably receive the offer price but you should call one of the attorneys handling the class action to confirm that this is correct. I look at it this way, you may get a little more to make the lawsuit go way but if you don't, you should still get the offer price
So if I decline the tender offer what happens again? What if enough share holders decline the offer? Can they really force this through?
I received my offer letter for my 5000 shares and really feel like Smulyan is screwing every shareholder that has supported this company through the last few years and the Slager Radio thing.
Just want to know what my options are and if everyone else is holding or dumping and if that's even possible at this point.