Sillerman strategy hard to value


When Bob Sillerman and Simon Fuller announced their deal to take CKX Inc. private (6/4/07 RBR #108) we asked, what is the FX Luxury Realty portion of the proposal worth? Unfortunately, we still don't have much of an answer.

Bear Stearns analyst Chris Ensley published a research piece on the buyout bid, but he is also a bit in the dark. "We do not have enough information to value FXLR, but expect CKX shares to trade between 13.90 and 14.50, until a proxy is filed.  Buying CKX at 13.90 implies buying FXLR at 50 cents per share, which seems attractive given Mr. Sillerman's penchant for making investors money.  Buying CKX above 14.50 implies buying FXLR at a premium to the 1.00 rights offering," Ensley noted, adding that "you would be better off participating in the rights offering."

The analyst did shed some light on why Sillerman decided to change course for CKX. "We believe three issues drove CKX to go private:  1) the inability to acquire the intellectual property rights of additional celebrities due to financial disclosure requirements; 2) a real estate opportunity that was inconsistent with CKX's low cap ex, high FCF investment opportunity; and 3) a mechanism to retain 19 Entertainment's CEO Simon Fuller." Makes sense to us.