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Emmis shares skid ahead of buyout vote

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Shareholders of Emmis Communications Corp. will vote Tuesday night at the company’s Monument Circle headquarters on whether to allow a sale to Chairman and CEO Jeff Smulyan.

But on Wall Street, the votes are leaning increasingly against Smulyan’s chances to take the radio and magazine company private.

Emmis shares lost 11 percent of their value on Monday and slid another 6 percent in the first two hours of trading Tuesday morning. The shares now can be bought for $1.65 apiece.

That’s more than 30 percent below the buyout offer of $2.40 per share, extended by Smulyan and Alden Global Capital, the New York-based private equity firm backing his bid.

Their tender offer for common shares ends today at 5 p.m. The vote will be held at a meeting at 6:30 p.m.

“Somebody’s concerned that the deal’s not going to happen,” said Mark Foster, chief investment officer at Kirr Marbach & Co. in Columbus, Ind., which does not own any Emmis shares. He said that when a company’s current trading price falls more than 12 percent of 15 percent below an offered buyout price, he starts to doubt a deal actually will be sealed.

Smulyan’s buyout bid has been threatened by shareholder lawsuits since just days after he announced his plans in April. Litigation in Marion County is ongoing, although a judge last week denied shareholders’ requests to halt the sale process until the case is resolved.

But the biggest cloud over the Emmis deal came last month when eight firms that hold Emmis’ preferred stock banded together to block the deal. Collectively they hold 34 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.

That conversion, in addition to approval by a majority of Emmis' common shareholders, is necessary to allow the buyout to go through.

Since the preferred shareholders announced their so-called “lock-up agreement” on July 9, Emmis shares have lost 27 percent of their value, with the biggest slide coming in the past two days.

“The risk, from an arbitrage standpoint, has just gone up a bunch,” said Bob Shortle, senior managing director at Periculum Capital LLC, an Indianapolis-based investment banking firm.

Emmis spokeswoman Kate Snedeker declined to comment on the liklihood of the buyout winning approval Tuesday night.

Because Emmis’ trading volume is so thin—just 266,000 shares a day—Shortle thinks some investors are selling now instead of taking a risk that the buyout deal will fail, making it more difficult to find buyers for their Emmis shares.

“If all of a sudden, they announce this isn’t going to happen, I would expect the price to drop,” Shortle said.

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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  1. Now if he'd just stay there...

  2. Daniel - what about the many US citizens who do NOT follow what the Bible teaches? The Hindus, Jews, Muslims and others who are all American citizens entitled to all rights as Americans?? This issue has NOTHING to do with "What the Bible says..." Keep all Churches separate from State! Pence's ongoing idiocy continues to make Indiana look like a backwards, homophobic state in the eyes of our nation. Can't we move on to bigger issues - like educating our kids?

  3. 1. IBJ should link to the referenced report. We are in the age of electronic media...not sharing information is lazy. Here is a link http://www.in.gov/gov/files/Blue_Ribbon_Panel_Report_July_9_2014.pdf 2. The article should provide more clarity about the make-up of this panel. The commenters are making this item out to be partisan, it does not appear the panel is partisan. Here is a list of the panel which appears to be balanced with different SME to add different perspectives http://www.in.gov/activecalendar/EventList.aspx?view=EventDetails&eventidn=138116?formation_id=189603 3. It suggests a by-pass, I do not see where this report suggests another "loop". 4. Henry, based on your kneejerk reaction, we would be better off if you moved to another state unless your post was meant as sarcasm in which case I say Well Done. 5. The article and report actually indicates need to improve rail and port infrastructure in direct contradiction to Shayla commentary. Specifically, recommendation is to consider passenger rail projects... 6. People have a voice with their elected officials. These are suggestions and do not represent "crony capitalism", etc. The report needs to be analyzed and the legislature can decide on priorities and spending. Don't like it, then vote in a new legislature but quit artificially creating issues where there are none! People need to sift through the politics and provide constructive criticism to the process rather than making uninformed comments in a public forum based on misinformation. IBJ should work harder to correct the record in these forums when blatant errors or misrepresentations are made.

  4. Joe ... Marriage is defined in the Bible ... it is mentioned in the Bible often. Marriage is not mentioned once in the US or Indiana Constitution ...

  5. Daniel - Educate me please: what does the Bible have to do with laws? If the government wasn't in the business of marriage to begin with, then it wouldn't have to "define" marriage at all. Marriage could be left as a personal, religious, or otherwise unregulated action, with no ties to taxes, legal status, etc. Then people could marry whomever they want, and all this silliness would go away. Remember to vote Libertarian in November.

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