Emmis board says buyout is fair – and the only bid possible


In documents filed with the SEC, the Board of Directors at Emmis Communications has explained its decision to endorse the bid by CEO Jeff Smulyan to take the company private. It also dismisses any notion of putting the company up for auction.

Although the letter of intent from Alden Global Capital, which has teamed with Smulyan for the buyout, specifically called for the board to make no recommendation under a special provision of Indiana business law, the board did refer the offer to a special committee of independent directors – which gave its blessing to the bid to buy out public shareholders for $2.40 per share.

“The Committee of Disinterested Directors has unanimously determined that the Merger Agreement, including the Offer and the Merger, are advisable and fair to and in the best interests of Emmis and the holders of Shares other than the Shares beneficially owned by the members of the Purchaser Group, the Rolling Shareholders and Alden and recommended that the board of directors of Emmis approve and adopt the Merger Agreement and recommend that the Unaffiliated Shareholders accept the Offer, tender their Shares in the Offer and approve the Merger and the Merger Agreement. The Board, acting on the Committee Recommendation determined that the Merger Agreement, the Merger and the Offer were fair and in the best interests of the Unaffiliated Shareholders and recommended that the Unaffiliated Shareholders accept the Offer, tender their Shares in the Offer and approve the Merger and the Merger Agreement,” Emmis said in an SEC filing.

“Did the board of directors and the Committee consider alternatives to the Transactions?” is a question asked and answered in the Q&A section of proxy materials to be sent out to shareholders.
“The Committee took into account that Mr. Smulyan and his affiliates owned, as of May 25, 2010, shares of Common Stock representing approximately 60.0% of the total voting power of Common Stock, and that Mr. Smulyan has publicly stated that he is not interested in selling his shares of Emmis. Accordingly, the Committee concluded that an acquisition of Emmis by a third party was not a feasible alternative, nor is the Committee aware of any other party making a proposal to buy Emmis or any significant minority stock ownership position since Mr. Smulyan made its initial proposal to acquire Emmis in 2006,” the committee of independent directors stated in the proxy materials. “The board of directors of Emmis considered the same factors and came to the same conclusion,” it added.

Emmis has not yet set a date for a special shareholders meeting in which holders of the company’s common stock and its preferred shares are to vote on proposed amendments to the terms of the preferred stock which are required for the going private transaction to go through.

As previously reported, the tender offers for the cash buyout of the Class A common shares and the swap of preferred shares for new notes should begin this week and wrap up at the beginning of July.

RBR-TVBR observation: This is a bit complicated, so shareholders need to understand that the special meeting and the tender offers are separate events, albeit related ones. Voting in the special meeting will not tender your shares for the cash payment (or new notes if you happen to own the preferred shares). If you want to accept the $2.40 in cash for your Emmis Class A shares you have to tender them for acceptance under the terms of the tender, so call your broker or the investor relations department at Emmis if you need information on how to do that.