As scheduled, a meeting of shareholders of Emmis Communications was convened Tuesday evening in Indianapolis. But there was no vote to clear the way for CEO Jeff Smulyan to take the company private. Instead, the meeting was adjourned until Friday and the tender offers for the related transactions were extended as well.
The purpose of the meeting was to vote on amendments to the company’s articles of incorporation which would make it possible for Smulyan to buy out all other common shareholders, eliminate the current preferred shares by exchanging them for new bonds and take the company private.
The Indianapolis Business Journal reported that there was not a quorum for the meeting, which is not surprising since many common and preferred shareholders are likely waiting to learn the outcome of a standoff between Smulyan and a group of hedge funds and other investors who are holding more than a third of the preferred shares and have vowed to vote “no” unless their deal is sweetened. A two-thirds “yes” vote by the preferred shareholders is required for the changes to the articles of incorporation.
The whole buyout remains in flux, so Smulyan’s JS Acquisition and Emmis have also extended their tender offers until Friday, when the company will try again for a shareholders vote.
“The offers are being extended because Emmis, JS Parent, JS Acquisition, Mr. Smulyan and certain other interested parties have been unable to date to reach an agreement in negotiations with a group of holders of Preferred Stock that owns approximately 38.3% of the outstanding shares of Preferred Stock in the aggregate, and who have previously advised Emmis and Mr. Smulyan that they would vote against the amendments to the terms of the Preferred Stock at the special meeting. JS Acquisition has informed Emmis that during the extension, JS Parent, JS Acquisition and Mr. Smulyan are continuing to negotiate with that group and are also considering other options, including an alternative structure that would still allow a tender offer for the Class A Common Stock to proceed without any changes to the terms of the Preferred Stock and without an offer by Emmis to exchange the New Notes for the Preferred Stock. There can be no assurance that either an agreement will be reached with the group of holders of Preferred Stock or that an alternative structure can be implemented,” Emmis said in a statement late Tuesday.
As of the previous expiration date of August 3rd, only 1,574,615 shares of the 2.8 million preferred shares had been tendered for the exchange for new 12% PIK Senior Subordinated Notes due 2017 at 60% of the face value of the old preferred shares. The tender for Class A common shares did better, with 21,270,888 shares tendered for the offer of $2.40 each in cash. “If not withdrawn at or prior to the expiration of the tender offer, such shares would satisfy the Minimum Tender Condition,” the announcement noted. There are 29,722,866 Emmis Class A shares owned by holders other than Smulyan and his financial backer, Alden Global Capital.
RBR-TVBR observation: Nobody said this was going to be easy. Jeff failed in a previous attempt to take the company private at a much higher price. That probably saved him from a default situation in the recession. Now the issue is whether the preferred shareholders are overplaying their hand. If they hold out and scuttle the buyout their preferred shares could plunge back to where they were a year ago: $1.50 instead of the current $22+.
