Group offers 1.10 per share for Interep
Interep's long languishing stock price stock shot up to 88 cents at one point yesterday after Oaktree Capital Management went public with an offer to buy the company for 1.10 per share, a 439% premium to Tuesday's closing price of 20 cents. But saying it is frustrated by months of negotiations, Oaktree has given Interep's board of directors a deadline of April 21st to act on the 14.3 million bucks offer.
Oaktree is Interep's largest bondholder, which gives it leverage to rework the company's 100 million in debt if it gets control. It was exactly a year ago (4/18/05 RBR #76) that Oaktree began a push to reorganize the rep firm and replace Ralph Guild as CEO.
Although Interep's management and board resisted, Oaktree insisted that it was not attempting a hostile takeover, but rather was seeing a restructuring which would be better for Interep's shareholders, employees and clients (5/16/05 RBR #96).
Despite the public rancor, the two sides obviously found their way to a negotiating table and Oaktree put a bid of 75 cents a share on the table. That was negotiated up to 1.10, but Oaktree now complains that there's been no action since it completed its due diligence and said it was ready to sign a contract last December 13th. It's now told Interep's board of directors that it wants a deal by a week from Friday (April 21st) or its pulling the buck-ten offer off the table.
RBR observation:
Things have been improving (other than its stock price) for Interep since Oaktree first went public with its call for Guild's ouster and a restructuring. Business has improved in the radio rep business and Interep has made its first foray into TV representation with Azteca America Spot Television Sales. But balance sheet issues remain. Interep sold its IPO at 12 bucks a share in December 1999 and the stock traded for a while above 13, but it long ago dropped into penny stock territory. With a stock that's been trading for two bits or less on the pink sheets, Interep's directors are going to be under pressure from shareholders, many of whom are Interep employees, to take the cash.
Read the letter from Oaktree.
TO THE MEMBERS OF THE BOARD OF DIRECTORS OF INTEREP NATIONAL RADIO SALES, INC:
Re: Interep National Radio Sales, Inc. ("Interep" or the "Company")
Dear Board Member:
As you know, certain funds managed by Oaktree Capital Management, LLC (together, the "OCM Funds") entered into a letter of intent with Interep on November 10, 2005 (the "Executed LOI") pursuant to which the OCM Funds, subject to their satisfactory completion of due diligence, would acquire through a merger transaction all of the Company's outstanding common shares for USD1.10 in cash per share. We had initially proposed USD0.75 per share, but agreed to raise our offer to USD1.10 in exchange for a timely process.
The Executed LOI stipulates that Interep and the OCM Funds shall use their commercially reasonable efforts to enter into a definitive agreement within two weeks after the OCM Funds confirm their willingness to move forward with the transaction. On December 13, 2005, the OCM Funds provided such confirmation to the Company with the expectation that the definitive agreement would be signed by the end of 2005.
Instead of following the agreed upon process, over the past four months the Board of Directors disbanded the original special committee that was authorized to negotiate the transaction, changed counsel twice and changed financial advisors, all of which created confusion, unnecessary delay and increased expense. The OCM Funds believe that these actions may have been taken in bad faith.
Our patience is running out. The OCM Funds are still prepared to complete the transaction at USD1.10 in cash per share (which represents a 439% premium to yesterday's closing price), subject only to limited customary conditions for transactions of this type. However, if the Company's Board chooses not to finalize the transaction by 5:00 pm EDT on Friday, April 21, 2006, we will withdraw our offer.
My colleagues and I firmly believe that this transaction is in the best interests of the Company's shareholders and that any further delay in finalizing the transaction will cause irreparable damage to the shareholders. Accordingly, we urge you to take very seriously your fiduciary duties to Interep's shareholders. We will make ourselves available immediately upon your request to finalize the remaining points in the definitive documentation with the objective of signing such documents by the end of next week.
This letter is without prejudice to the full exercise by the OCM Funds of any and all of its rights and remedies against the Company and against each of its directors and officers, all of which expressly are reserved.
Sincerely,
B. James Ford
Managing Director
Oaktree Capital Management, LLC
Good Morning - Gain a personal edge on today's business day. Are you reading this from a forwarded email?
