Dissident pressures Emmis directors

Martin Capital Management Senior Partner Frank Martin discloses in an SEC filing that he has gone to the independent directors of Emmis Communications to try to put pressure on CEO Jeff Smulyan. In short, he wants them to demand that Smulyan agree to sell off the company's assets or quit their board seats. Smulyan is still working to sell off Emmis' last TV station, but he has indicated no interest in putting the radio and magazine portfolios up for sale. Martin, who owns over 3.1 million Emmis shares, or 9.7% of the publicly traded Class A shares, cites such notables as Benjamin Franklin, Thomas Paine and Abraham Lincoln in railing against Smulyan for being "ostensibly accountable to no one but himself" by virtue of his voting control of the company via super-voting Class B shares.

To air his grievances, Martin, along with Dennis Blyly of Martin Capital Management, conducted a video conference call with lead independent director Susan Bayh, wife of Sen. Evan Bayh (D-IN), and the other independent directors on the Emmis board, Richard Leventhal, Peter Lund, Greg Nathanson and Lawrence Sorrel. It appears Martin did not think he was successful in persuading the directors, since he has now filed with the SEC a draft letter that he said "will never be filed" if the partners of Martin Capital Management were able to come to "a mutually satisfactory meeting of the minds regarding the future of Emmis." The letter recounts much of the history of Emmis as a public company, detailing what Martin claims has been Smulyan's mismanagement of the company and dissipation of shareholder value. "Smulyan's reign as Sovereign of Emmis should have ended long ago," Martin declares. He wraps up by calling on the independent directors to "do everything possible to help Mr. Smulyan come to grips with the harsh reality that his lease on Emmis is up."

Following Martin's latest filing, Smulyan issued a statement: "Frank Martin is a substantial long-time investor in our company and although he has been critical of management in the past, the outside directors on our board believed it was appropriate to meet with him so that he could express his views. Looking at his SEC filing today, his views are substantially the same as he has expressed in the past, and we continue to disagree with the approach he advocates." Rather than sell off assets, Smulyan intends to operate them. "Our management team, the board of directors and I continue to believe in the long-term vitality of Emmis and its media assets, and the radio industry overall. We will continue to pursue the creation of shareholder value by investing in our current portfolio and special initiatives, such as Emmis Interactive," he said.

RBR/TVBR observation: How did Martin Capital Management become the second-largest shareholder of Emmis and, eventually, a thorn in Smulyan's side? The latest filing explains that Martin began buying Emmis shares shortly after the 9/11 terrorist attacks of six years ago depressed stock prices. Despite its dissatisfaction with the way Emmis is being run, Martin has still been buying shares on the open market recently because of the disparity between the trading price and what it views as the company's intrinsic value. All in all, Martin paid approximately 38.9 million for its Emmis stake, which is currently worth around 18.7 million.

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