Emmis board endorses going private transaction


CEO Jeff Smulyan’s bid to take Emmis Communications private at $2.40 per share has gotten a thumbs-up from the company’s board of directors. The company announced late Tuesday that it has signed a definitive merger agreement to be acquired by JS Acquisition LLC, the company that Smulyan has formed with Alden Global Capital.

The company announcement said the transaction to take Emmis private will be accomplished with a cash tender offer for its Class A Common Stock at $2.40 per Share, an exchange offer of 12% Senior Subordinated Notes due 2017 for its Preferred Stock, amendments to its Articles affecting the Preferred Stock and a back-end merger.

“The merger agreement, the tender offer, the exchange offer and the Preferred Stock amendments were unanimously approved today by the Board of Directors of Emmis. Approval of the tender offer and merger agreement were recommended by a Committee of Disinterested Directors of Emmis,” said the Tuesday announcement.

Two lawsuits have already been filed in Indianapolis, where Emmis is headquartered, charging that the directors are breaching their fiduciary duty to shareholders by accepting the buyout. The lawsuits claim the offer of $2.40 per share is unfairly low.

“The all cash purchase price of $2.40 per share represents a 74% premium over the 30-trading day average closing price of the Class A Common Stock and a 118% premium over the 180-trading day average closing price of the Class A Common Stock as of April 26, 2010, the date when Mr. Smulyan and Alden first announced their intention to pursue the transaction,” the company said in its Tuesday announcement.

RBR-TVBR had calculated that the total value of the Emmis going private transaction is $670 million. Of that, $76.3 million would be in cash payments to Emmis shareholders other than Smulyan and Alden. The rest is in the value of the shares they already hold, conversion of the preferred and the debt being assumed.

RBR-TVBR observation: Look for even more lawsuits to be filed, but the consensus from observers we’ve spoken with is that this deal will get done. Smulyan tried to take Emmis private in 2006 at $15.25 per share, but that’s ancient history given the economic turmoil the country has been through since then. Many shareholders are now happy to just take the $2.40 and move on.