UPDATE: Emmis shares slide after firm says deal in peril

Emmis Communications Corp. shares tumbled 14 percent Monday morning after private-equity firm Alden Global Capital backpedaled
and withdrew its support for a compromise aimed at saving CEO Jeff Smulyan’s plan to take the company private.

Emmis said in a news release that Alden had previously signed off on an “agreement in principle” revising the
terms of the deal. The broadcasting company said the other parties—Emmis, Smulyan’s JS Acquisition and a group
of preferred shareholders blocking the original deal—also had agreed to the compromise.

The stock fell 29 cents, to $1.73—far below the $2.40 a share Smulyan agreed to pay under the original deal. That pact
valued Emmis at about $90 million. Emmis did not disclose the terms contained in the compromise that Alden has decided not
to support.

Discussions are continuing, Emmis said in the release. But because of Alden’s reversal, “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.”

Alden officials were not immediately available for comment.

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 his original offer.

The preferred shareholders opposing the original deal hold 38 percent of Emmis' preferred shares. The deal requires backing
from holders of at least two-thirds of the preferred shares.

Emmis said Monday that it has extended its original offer until Sept. 2, as the company, 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.
 

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