Alden Global Capital walks on Emmis buyout


Emmis Communications CEO Jeff Smulyan finally struck a deal with the Preferred Shareholders Lockup Group which had been blocking his effort to take Emmis private. But while his financial backer, Alden Global Capital, had initially agreed to the revised deal, it has now reconsidered and told Smulyan it will not fund the transaction as negotiated.

“We thought we had a deal. Alden reconsidered. You’ll have to ask them why. Alden has communicated to us that they are having internal meetings related to the transaction this week,” an Emmis spokesperson told RBR-TVBR on Monday.

Alden did not return phone calls from RBR-TVBR.

Despite the lack of funding for the going private transaction, the tender offers for Smulyan’s JS Acquisition to buyout common shareholders at $2.40 per share and for Emmis to exchange new bonds for its preferred shares have been extended to 5:00 pm ET on Thursday and the shareholders meeting, which had been adjourned six times without a vote, is officially scheduled to resume at 6:30 pm ET on Thursday in Indianapolis. That appears to be just a formality at this point, since the tenders can’t go to closing unless Alden returns with financing for the deal.

It appears the change of heart by Alden was rather sudden, since Emmis had planned to reconvene the shareholders meeting on Monday morning (8/30), but instead announced that Alden had withdrawn its funding. That brief session Monday was the sixth adjournment of the meeting.

“During the past several weeks, Emmis, JS Parent, JS Acquisition, Mr. Smulyan, Alden and the representatives of the group of holders of Preferred Stock negotiated and agreed in principle on revised economic terms for the contemplated transactions that each indicated it would support. Subsequently, Alden has informed Emmis, JS Parent, JS Acquisition and Mr. Smulyan that it would no longer support the negotiated terms. Accordingly, although discussions are continuing, JS Acquisition believes it is unlikely that an agreement will be reached with either Alden or the group of holders of Preferred Stock,” Smulyan’s JS Acquisition announced on Monday morning.

The share counts for the tenders, as of Friday, August 27th, were little changed from a week earlier, with a little over 21 million Class A common shares tendered and 422,403 preferred shares.

RBR-TVBR observation: As you would expect, the collapse of the going private transaction sent the stock price for Emmis Communications into a freefall. The stock price fell on Monday back below the April 21, 2010 close of $1.90 before it started moving up as some traders apparently got wind of the deal in the offing. The proposed buyout at $2.40 per share was announced on April 26, when the stock closed at $2.26.

Emmis closed Monday (8/30) at $1.70, off 32 cents for the day.

The question now: Is Alden, which is still a major Emmis common/preferred shareholder, playing hardball with the lockup group, or really walking away?