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Emmis delays vote on buyout again

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Emmis Communications Corp. officials said they are encouraged by negotiations with a group of preferred shareholders, but on Friday night were forced for the second time in a week to delay a vote on taking the company private.

The first vote was set for Aug. 3. After that meeting, company officials said Emmis CEO Jeff Smulyan was continuing to negotiate with preferred shareholders but also was considering other avenues to complete his purchase of the company, including one that would not require their consent.

Emmis has rescheduled the shareholder vote for Aug. 13. Smulyan did not attend Friday's meeting.

“We continue to engage in discussions with preferred shareholders,” said Scott Enright, Emmis general counsel. “The tenor of those talks has been encouraging, but we can’t make any assurances at this time.”

Emmis shares closed at $2.07 on Friday, wrapping up a roller coaster week in which the shares began trading at $1.95 on Monday morning, fell to $1.60 on Tuesday, then soared as high as $2.10 on Wednesday. The stock remained well below Smulyan’s offer of $2.40 per share, indicating there is doubt Emmis’ founder can pull off his plan.

Last month, eight firms that hold Emmis preferred stock banded together to prevent the sale. Collectively they hold 38 percent of Emmis preferred shares.

That’s enough to prevent Smulyan from winning two-thirds approval from preferred shareholders to convert their shares into bonds—at 60 cents on the dollar—in exchange for the attractive interest rate of 12 percent.

Smulyan’s proposal also requires approval from the holders of a majority of Emmis shares, a threshold Smulyan likely would be able to meet.

Smulyan, through his JS Acquisition Inc. and New York private equity firm Alden Global Capital, submitted his offer in April. The bid values the company at about $90 million.

Alden already is a major shareholder, and Emmis executives who plan to roll over their stakes also would be expected to vote yes.

Founded by Smulyan in 1981, 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.

The company’s audience base has been trimmed by competition from satellite radio and iPods at the same time advertisers have funneled more dollars to the increasing number of websites and cable television channels.

Over the past four years, Emmis’ revenue has swooned by 33 percent to $243 million. Its continuing operations have wracked up losses of more than $430 million.

That performance has caused Emmis’ share price to plunge since the last time Smulyan tried to take the company private in May 2006. At that time, Smulyan’s buyout group offered $15.25 per common share, but could not come to terms with the company’s board of directors.
 

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