It will be up to shareholders at Emmis Communications whether or not to accept the buyout offer at $2.40 per share from CEO Jeff Smulyan and his financial allies. It is not a slam-dunk at this point.
While Smulyan has voting control of Emmis by virtue of his super-voting Class B shares, that super-voting status doesn’t apply for a going private transaction vote, so his shares count for one vote each, just like the Class A shares held by the public. A Wall Street observer ran some numbers for RBR-TVBR.
Smulyan and his family own about 25.2% of the equity of Emmis. It turns out that’s just slightly more than the five largest institutional investors, who have 23.5% according to their latest SEC filings – although it should be noted that some of those filings are many months old. The second five institutional holders hold 13.3%, which is a bit more than the 10.2% held by funds managed by Alden Global Capital, which has teamed with Smulyan for the buyout.
So, Smulyan and Alden have 35.4% of the votes, while the ten largest institutional investors (excluding Alden, of course) have 36.8%. That leaves 27.8% in the hands of smaller holders.
The question now is whether the big investors – some of whom no doubt regret that Smulyan’s previous buyout offer of $15.25 per share in 2006 was blocked by the independent directors on the Emmis board as inadequate – will go for the $2.40 offer. Will they, instead, pressure Smulyan and Alden to sweeten the pot? That was what Cox Enterprises did to take Cox Radio private – boosting its initial offer of $3.80 per share to $4.80.
Who are the big institutional owners of Emmis stock? The usual suspects. Long-time dissident shareholder Martin Capital Management has reduced its stake, but is still in the group. Other big holders include Luther King Capital Management, Dimensional Fund Advisors, Ohio-State Teachers Retirement System, Scepter Holdings, Towerview (Daniel Tisch), Farallon Capital Management, Credit Suisse, BlackRock and Nikos Hecht.
Now we wait to see what they intend to do.
RBR-TVBR observation: It’s like a hand of poker. If you overplay your cards you can lose big, as happened for the big Emmis investors in 2006.