Three days did not produce a resolution, so the shareholders’ vote on legal niceties to take Emmis Communications private has been put off for another week. The target date is now Friday the 13th of August.
According to the Indianapolis Business Journal, the Friday, August 6th reconvened shareholders meeting was a non-event, with Scott Enright, the company’s General Counsel, saying only that talks were continuing with the dissident preferred shareholders who hold over a third of the company’s preferred stock. He called the talks “encouraging.”
Founder and CEO Jeff Smulyan made a bid in April to take Emmis private, with backing by Alden Global Capital, valuing the company at $670 million. The offer to Class A common shareholders is $2.40 per share. That’s a far cry from the $15.25 offer he made in 2006, which was rejected, but well above where the stock had fallen to in the recent recession.
The hang-up is not the Class A shares – the overwhelming majority of holders tendered those for the $2.40 offer – but rather the preferred shares. The majority of those 2.8 million or so shares were tendered by the previous deadline for new bonds at 60% of face value, but a majority isn’t enough. Smulyan needs a two-thirds “yes” vote by preferred shareholders to change the terms of the issue and complete the going private transactions. A group of holders with more than one-third collectively are holding out for a better deal.
While 60% may sound like a deep discount, the preferred shares were trading well below 10% of face value just a year ago, so many of the current owners bought them at an even deeper discount to face value.