Emmis Communications Corp. will contribute $200,000 toward legal fees in a lawsuit that company founder Jeff Smulyan’s JS Acquisition LLC filed over its failed effort to take the Indianapolis-based media company private.
Emmis’ board unanimously approved the expenditure Dec. 24, according to a filing this week with the Securities and Exchange Commission. If the litigation is successful, the company will be repaid $300,000 from any financial recovery.
Indianapolis law firm Bose McKinney & Evans LLC was retained to coordinate the breach of contract lawsuit, filed in September against three Alden Global Capital units that backed out of the going-private deal.
JS Acquisition says the transaction failed when Alden changed course after months of negotiations with a group of preferred shareholders, costing the company about $10.2 million in fees and other expenses.
Alden and JS Acquisition, a private company formed by Smulyan to complete the buyout, agreed in April to take Emmis private. But, in July, nine dissident investors—holding a combined 38 percent of the company’s preferred shares—emerged to block the $90 million deal.
Although the parties worked to find a compromise, Alden ultimately pulled out of the transaction, citing a “precipitous” drop in radio-industry assets.
Since the deal was announced April 26, Emmis shares have declined in value by about 70 percent, closing Tuesday at 69 cents. The company is in danger of being delisted from the NASDAQ stock exchange because its share price has lagged below $1 for so long.
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.