EMMS Going Private Analysis


On May 25, 2010, Emmis Communications Corporation announced that it signed a merger agreement with JS Acquisition, LLC, a company owned by EMMS’s Chairman and CEO, Jeffrey Smulyan, effectively taking the company private. Common stock holders will be cashed out at $2.40 per share in a deal worth approx. $90.2m. The deal has been in the works since late April, when the company received a letter of intent regarding the going private transaction.


Holders of Class A common stock will receive $2.40 for each share tendered. Other considerations are due to preferred stock holders.

Shareholder Complaint

As often happens in these transactions, several lawfirms are investing whether the board of directors breached its fiduciary duties to shareholders by accepting the going private offer. These lawsuits allege that the closing price of $2.40 is only 11% above the most recent closing price of $2.38.

However, I do not see this as being a major roadblock to the transaction. The only reason for the small premium was that a letter of intent was signed back in April. The $2.40 offer is 74% above the 30-day average trading price and 118% above the 180-day average trading price, a significant premium.

Board Approval

The board approved the transaction in conjunction with the merger announcement.

Shareholder Approval

In order to approve the transaction, a majority of common shareholders must tender their shares in favor of the merger. Since Jeffrey Smulyan owns 60% of outstanding Common Shares, this part of the approval is already assured.

In addition to the common shareholder approval, 2/3 of Preferred Stock holders must also vote to tender their shares. Alden Global Capital, the asset management company that is providing financing for the transaction, holds 41% of outstanding preferred shares and has voted to approve the merger.

This means only 25% of preferred stock holders must vote to approve the merger in order for the transaction to go through.


The tender offer will commence on June 3, 2010 and will last at least 20 business days. Assuming preferred shareholders promptly tender their shares, the going private transaction should commence sometime around July 1, 2010.


Unless something falls through with the financing, I don’t see very many risks with this transaction. Jeff Smulyan controls the majority of the company and seems to have the backing of the board and the largest preferred shareholder. I’m anticipating the merger will go through in July.

Shares can be picked up for $2.29 per share, resulting in a quick ~5% return in just over 30 days

Supporting Documents

Document LinkDate
Merger Press Release05/25/2010
Merger Agreement05/25/2010
Preliminary Proxy Statement05/27/2010



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7 Responses so far

  1. Jae Jun says:

    I was hoping it would go further down to buy more in my cash account but it’s holding up well like special situations do.

    How did you get the table at the bottom by the way? I havent been able to find a proper way to display tables in wordpress yet.

  2. asues says:


    I only just realized that you had invested in EMMS months ago, and had even posted about the arbitrage opportunity on your blog. I found the going private transaction through my Google Alerts.

    I’m using a plugin for the tables, WP-Table Reloaded, that seems to work well for tables that require links. Overall, I still prefer pasting images as I can mess around with the colors and formatting, but the plugin serves its purpose.

  3. Joseph Carrozza says:

    News released today. Preliminary proxy statement is released as well as news that the tender offer deadline is being extended by one day. There is also some information about changes in the financing of the deal. I am going to be digging through this and hopefully we can share some conclusions at the end of the day.

    • asues says:

      Agreed. So the question now: what does this mean? What is Loeb’s goal in this activist transaction?

      Do you think the preferred stock holders are just trying to get a better conversion rate for their preferred shares, or trying to totally block the deal? How will it affect the price of the common stock?

      I’m not sure there are set answers, but Loeb apparently sees additional value in holding up the completion of this deal. The stock barely dropped on the day of the initial announcement of the lockup, and is only down a few percentage points since. I’m going to hold for a bit and see what happens.

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