Just hours after the bid was publicly announced, independent directors of CKX on Friday approved a deal that will have founder Bob Sillerman and Simon Fuller take the company private for 13.75 per share in cash, a 29% premium over the previous closing price, for a total of 1.3 billion. What wasn't known before Friday's announcement is that CKX shareholders will also get shares in another Sillerman-related company which is planning a casino/hotel/commercial/residential real estate development in Las Vegas. Although the deal has been agreed to, the committee of independent directors at CKX and their financial advisor now have a 45-day "go-shop" period to see if a higher bid, at least 25 cents per share higher, can be found – and there's no breakup fee due Sillerman and Fuller if they do.
The proposed transaction will have CKX acquired by 19X, a new private company owned by Robert F.X. Sillerman, who likes to get that X into his company names, and Simon Fuller, who is still CEO of 19 Entertainment, owner of the rights to "American Idol," since selling it to CKX. Besides Idol, the other primary assets of CKX are the rights to the name, likeness and image of Elvis Presley and Muhammad Ali.
What will remain with CKX shareholders are shares in FX Luxury Realty, which Friday's announcement refers to not as a real estate company, but a "location-based entertainment company." CKX recently acquired 50% of the company for 100 million and, once the buyout closes, Sillerman plans to sell more stock so it can move forward with some big plans. Those plans include building the new casino, hotel & etc. in Vegas and a hotel next to Graceland in Tennessee. FX Luxury will have the rights to develop casino, hotel and restaurant properties using the Presley name and hotel and retreat centers using the Ali name.
RBR observation: The 29% premium over the previous CKX price is obviously attractive to shareholders. The big question is this: What are the FX Realty shares worth? CKX has 97 million shares outstanding, so the simple answer is about a buck, since CKX just bought the stake for 100 million. That buck was pretty much what traders built into the CKX price on Friday. Is it really worth more, if you believe that the Elvis and Ali names are going to be big money makers in the hotel business? According to Sillerman, who has made a buck or two over the years in radio, on Broadway and elsewhere, this is a big opportunity, but will require a lot of capital. That's his explanation for why he and Fuller want to cash out investors in the current business and raise big bucks to, as Sillerman put it, "develop real estate and location-based projects that exploit CKX's iconic intellectual property content."