E Acquisitions Corp., the company that Smulyan has established to complete the acquisition, would purchase all shares of publicly traded Emmis for $4.10 each, according to a proposal announced late Thursday. Smulyan stated that he had secured financing from Falcon Investment Advisors, a Boston-based private equity firm.
With approximately 12.2 million Emmis shares outstanding, the deal would be worth about $50.3 million.
If Smulyan’s proposal is successful, Emmis would cease to be a public company, according to the proposal. Emmis shares were trading at $3.96 at market close on Thursday, meaning Smulyan was offering a scant markup for the shares.
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| Jeff Smulyan |
This time, it appears he has a good shot at succeeding.
“I would think there is a reasonable chance this could go through at this time. Given how small the market cap is, I don’t see any major holders that will dig in their heels and say, 'They’re not paying us a fair price,'" said Mark Foster, a stock analyst with Columbus-based Kirr Marbach. “It’s a decent premium based on where the stock was trading two months ago.”
“The company must think word leaked on this proposal pushing the stock price up in recent days,” Foster said. Shares had been trading near $3 before a sudden spike in the second week in July.
The company soon might look different than it does today, if the transaction goes through. Emmis is considering options to reduce its debt and “exploring strategic alternatives”—Wall Street lingo for exploring a sale—for its publishing division, according to the proposal. It also might sell some of its radio stations.
Smulyan started Emmis in 1979 with the acquisition of a Shelbyville radio station. The company went public in 1994.
Emmis has the ninth-largest radio portfolio in the U.S., according to the company. It owns 19 FM and four AM radio stations in Indianapolis, New York, Los Angeles, St. Louis and Austin, Texas. The company's best-known stations include WIBC-FM (93.1) in Indianapolis, KPWR-FM (105.9) in Los Angeles, known as Power 106, and WQHT-FM (97.1) in New York, known as Hot 97.
In an letter to Emmis employees, Smulyan stated:
Emmis Employees,
I wanted you to be among the first to know that Emmis’ Board of Directors met this morning, and has formed a special committee to consider a proposal to purchase Emmis’ publicly held Class A common stock and take the company private. I am leading this effort, and fully expect that other officers, directors and certain other shareholders will join me.
How have we reached this point? I firmly believe in the power of radio and magazines. I believe in our ability to create compelling content and connect with listeners, readers and advertisers over the air, in print and digitally in ways other media cannot. I believe NextRadio will bring about a renaissance of the radio industry. I believe Digonex will revolutionize the way goods and tickets are priced. Unfortunately, Wall Street does not share our strongly held view of these businesses. Investors have fled the radio and magazine industries. Trading volume in our stock has dwindled, meaning investors who want to sell are limited in their ability to do so.
Taking the company private offers two primary benefits. First, we eliminate the substantial costs associated with being a public company. These costs are not only monetary. They also include the burdensome compliance and reporting costs all public companies face. Second, we can focus on long-term value creation and be less concerned with quarterly peer comparisons.
Unfortunately, in order to address the company’s debt issues, we need to look at selling assets. I would never consider such action unless absolutely necessary. Nothing pains me more than making decisions like this. After considerable discussion, we plan to explore the sale of Terre Haute radio, WLIB-AM in New York, and our Publishing Division (excluding Indianapolis Monthly magazine).
Many employees at these properties have been with Emmis for more than 20 years and have been tremendous contributors to our culture, our spirit of innovation and our hallmark of quality. I cannot thank them enough for all they have done to make Emmis what it is today. If sales are negotiated, we will provide stay bonuses for our people. In keeping with our culture, if sales are consummated and not all of our people are retained, we will provide generous severance packages.
During this process and after the process concludes, regardless of the outcome, our work is unchanged: execute our strategy, hit our budgets and key metrics, and deliver for our audiences and advertisers.
This is just the first step in a lengthy process. A “go private” transaction requires approval of both Emmis’ Board of Directors and Emmis’ shareholders. I will keep you as informed as possible, but legal guidelines only allow for fairly limited, formal communication going forward.
Thanks,
Jeff
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