The private equity firm backing Emmis Communications Corp. CEO Jeff Smulyan’s efforts to take his company private delivered a serious blow to the potential deal on Monday, saying it no longer supports a compromise negotiated with a group of preferred shareholders that had been blocking the deal.
Emmis said in a press release Monday that Emmis, Smulyan's JS Acquisition, the preferred-shareholder group and the private equity firm—Alden Global Capital— had reached an "agreement in principle" revising terms of the deal. But the broadcasting company said that after the parties achieved that breakthrough, Alden withdrew its support.
The deal has been in jeopardy for weeks. On Friday, Smulyan failed for a fifth time to sway a group of preferred shareholders to vote in favor of of the original deal. Under that agreement, which valued Emmis at about $90 million, common shareholders would receive $2.40 for each of their shares. The company did not reveal terms of the revised deal that Alden has decided not to support.
Discussions are continuing, Emmis said a release. But because of Alden's decision, "JS Acquisition believes it is unlikely that an agreement will be reached with either Alden or the group of holders of Preferred Stock."
“We thought we had a deal; Alden reconsidered—you’ll have to ask them why,” Emmis spokeswoman Kate Snedeker said in an e-mailed statement. “Alden has communicated to us that they are having internal meetings related to the transaction this week.”
The preferred shareholders who banded together to oppose the original deal hold hold 38 percent of Emmis preferred shares. The deal requires backing of holders of at least two-thirds of the preferred shares.
Emmis said Monday that it has extended its original offer until Sept. 2, as Emmis, JS Acquisition, Alden and the preferred shareholders continue discussions in an effort to reach an agreement.
Smulyan’s proposal also requires approval from the holders of a majority of Emmis shares, a threshold he likely would be able to meet.
Founded by Smulyan in 1981, Indianapolis-based Emmis owns 23 radio stations in the United States and publishes regional magazines in seven cities, including Indianapolis Monthly. It also operates radio stations in Slovakia and Bulgaria.
Smulyan entered into an agreement in April to take the company private.
This is not the first time Smulyan—the company's controlling shareholder—has tried to take Emmis private.
Smulyan made an offer in May 2006 to acquire all the shares of Emmis for $15.25 per share in a deal that valued the company’s stock at $567 million. He called off the deal a few months later after he couldn’t reach terms with the board. The company later declared a special $4-per-share dividend.
Emmis shares shed nearly 10 percent of their value Monday morning, and were trading at $1.83 each.