Emmis stock price little impacted by Merlin deal


RBR-TVBR analysis
Emmis Communications has made lots of news in 2010 and 2011 – a good bit of it not pleasant for the company – and its stock price has moved with the developments. The latest big news – selling three big market stations for $198 million – has had little impact on the stock price.

The chart below shows the closing stock price for Emmis from the first trading day of 2010 (Monday 1/4/10) through Wednesday (6/22/11). Last year’s big deal to take the company private – and then the collapse of that deal – had a lot more impact than this week’s big deal to sell some stations and get Emmis in proper financial shape to refinance its debt.

The price hung generally a few cents above a buck in early 2010, then began rising in April as rumors swirled that something was brewing. The announcement April 26, 2010 of an offer by CEO Jeff Smulyan, with backing from Alden Global Capital, to take Emmis private at $2.40 per share sent the stock price soaring to just under that mark.

The stock price stayed up in expectation of the buyout. But things started to unravel in July when RBR-TVBR broke the news that some preferred stockholders were dissatisfied with the terms of the deal and planned to vote no unless they got a better deal. Meanwhile, several purported class action lawsuits were filed claiming the $2.40 price cheated common shareholders.

Negotiations went on…and on and on…behind the scenes to strike a deal with the dissidents. Meanwhile, Emmis scheduled a shareholders meeting to vote on the going private deal for August 3rd. It did begin on that date – and may well have been the longest shareholders meeting in US corporate history.

The meeting was adjourned and reconvened (for a few minutes) day after day. Finally, on August 30th, it all fell apart. Smulyan struck a deal with the preferred shareholders, but Alden walked away. As seen below, the stock price dropped, but still stayed above $1.50 and even rallied to above two bucks for a while before beginning a slide that took it to a low point of 43 cents as Emmis reported disappointing revenue results for some of its largest markets.

As rumors began that Emmis was looking to sell some of its stations to raise cash – and then the rumors were confirmed by Emmis in SEC filings, the stock price moved back above a buck in early 2011 and has mostly stayed there since. And while the stock price briefly jumped to $1.25 on Tuesday (6/21) after the deal announcement, the stock price has settled back to where it was when Wall Street was only anticipating that a deal of some sort was likely. After all, Emmis isn’t going to book a profit on these stations, which it acquired in better days for a lot more than $198 million.

For Jeff Smulyan, the important thing is that Emmis is able to get its financial house in order so it can refinance its debt at attractive rates. And he told RBR-TVBR in an exclusive interview that he expects a payoff down the road from the stake that Emmis is retaining under the terms of the deal to sell the stations to Randy Michaels’ new company, Merlin Media.

Previous stories:

Randy Michaels back in radio as Emmis spins major market FMs

How Emmis came to own its exiting FM trio 

Merlin Media begins staffing up

Merlin Media is classic Randy Michaels