Emmis buyout tender to be launched next week


Now that the Board of Directors at Emmis Communications has endorsed the bid by CEO Jeff Smulyan and Alden Global Capital to take the company private at $2.40 per share, the next step is to ask the public shareholders to tender their shares for the payout. That is going to come quickly – next week, to be precise.

The merger agreement filed with the SEC to have Emmis acquired by JS Acquisition, the new entity created by Smulyan and Alden, requires the tender offer to commence no later than 5:00 pm New York time on June 3, 2010, which is next Thursday. The tender process is to take at least 20 business days, which would make the earliest possible completion date July 1.

When the buyout closes and Emmis is merged with JS Acquisition, all common stock shares owned by Smulyan/Alden, including those acquired in the tender, will be exchanged for their interests in the new parent company and canceled. Any shares not tendered by the public will be converted into the right to receive payment of $2.40 per share.

The existing preferred stock owned by Alden will be converted into new notes at a rate of $30 principal amount for each $50 of liquidation preference of existing preferred stock.

Preferred shares still held by entities other than Alden will be converted into the right to receive $5.85 and six-tenths of a cent per share. Thus, holders had better not be asleep at the switch and miss the concurrent tender to convert their outstanding 6.25% Series A Cumulative Convertible Preferred Stock to new 12% PIK Senior subordinated Notes due 2017 at a rate of $30 face value of the new notes for each $50 face value of the preferred shares. Those preferred shares have lately traded at around $24, up from a recent low of $13.54 in March before the announcement of the going private bid.

RBR-TVBR observation: What could go wrong? The going private buyout can be called off by mutual agreement of JS Acquisition and the Emmis board, subject to approval of the special committee of independent directors. It can also be called off by either JS Acquisition or the Emmis board if the tender hasn’t been completed by September 24 or there is a legal or regulatory block to closing in effect. It can also be called off by JS Acquisition if the Emmis board changes its recommendation that shareholders accept the offer or breaches the agreement. None of those things are likely to happen, although there are lawsuits pending by shareholders who claim they are being shortchanged.