If Wall Street is any indicator, investors are not expecting Emmis Communications to become a private company on Tuesday. The company’s stock dropped nearly 11% on Monday to $1.96, well below the $2.40 per share buyout offer from founder and CEO Jeff Smulyan.
As of Monday evening, a shareholders meeting was still scheduled for Tuesday in Indianapolis at which holders of Emmis common shares and preferred shares would vote on whether to approve changes to the company’s articles of incorporation to clear the way for the buyout. Approval by the common shareholders is a lock, but a group of holders of the company’s preferred shares, led by Geoffrey Raynor and Daniel Loeb, have vowed to vote “no” unless they get a sweetened deal. And since the dissidents hold over one third of the preferred shares, Smulyan can’t reach the required two-thirds “yes” vote without them.
There are still shareholder lawsuits pending against the buyout, but they would not appear to prevent the deal getting done – if Smulyan can come to terms with the preferred holders. A state court judge in Indiana last week refused to issue an injunction blocking the buyout at $2.40 per share. That ruling came in several consolidated shareholder lawsuits which claimed that the price shortchanged them.
In addition to the scheduled shareholders vote, August 3rd is also the day that the tender offers related to the buyout are supposed to expire. One tender is for common shares to be sold to Smulyan, with backing from Alden Global Capital, at $2.40 each. The other is for holders of preferred shares to exchange them for new payment-in-kind (PIK) bonds.
This was all supposed to come together on August 3rd, so that Emmis could become a private company as of August 4th. As of late in the day on August 2nd that was still in doubt.