Published on Thursday, 09 September 2010 16:30
In late May, Emmis Communications released a statement announcing that the corporation had officially agreed to be acquired
by JS Acquisition LLC, a new company formed by Jeffrey H. Smulyan, Emmis' Chairman and CEO. JS Acquisition will be purchasing the majority of Emmis Communications' stock for about $90 million. Emmis Communications' board unanimously approved the transaction that would take the troubled media company from a publicly traded one to a private one. However, after numerous attempts to satisfy some unhappy shareholders, Smulyan has terminated the sale and withdrawn his offer to purchase the company today
Smulyan had attempted to better the deal for a large preferred group of shareholders who refused to agree to the transaction, but his financial backer then decided to pull out of the deal. With the shareholders holding out for a better deal and with Smulyan out of time & backing, the sale of the company died.
This marks the second time in under 5 years that Smulyan has tried and failed to make his company private. The first attempt did not even pass initial board approval. This attempt seemed like a slam dunk a few months ago, making what was announced today a bit of a surprise to many.
Where does this leave Emmis Communications now? The answer is deep in debt and getting deep into trouble with creditors. The company is currently $340 million in debt. Reportedly, the company has lost over $500 million over the last two years and is in no financial shape to able to pay off the debts.
The good news, if there is any, is that out of that massive debt, only $4 million is due within the next year -- a manageable amount. The long-term debt will have to be restructured somehow -- a move many are not sure can easily happen.
Emmis Communications owns 23 radio stations nationwide and publishes seven magazines. Earlier this year, all of Emmis radio stations earned profits, except for stations in two markets: Chicago and Los Angeles. Their one and only Los Angeles radio station is leased out to a third party who sells their own advertising within the programming. That means their only real losing stations are their two in Chicago: WLUP-FM and WKQX-FM.
Earlier this year, in their annual report to the U.S. Securities and Exchange Commission, Emmis admitted that the company was open to selling one or both of their Chicago properties
. Now, with hefty debts that they will have to find a way to satisfy and with these two stations bleeding even more money away from the company, it seems like Emmis will have little choice but to sell their Chicago stations soon.
Many insiders felt that the sales would have happened within weeks of the company going private -- that Smulyan wanted to focus his energies in the direction of the sale, and then focus on the Chicago problems afterward. Now that the the company's sale is no longer a focus of Jeff Smulyan (although it did not turn out the way he hoped), focus should soon be turning toward Chicago, regardless.
The sale of WKQX-FM was seemingly a done deal a few months ago, with a new company formed by Chicago sports owner Jerry Reinsdorf, along with Jeff Smulyan himself, looking to purchase the frequency from Emmis to turn it into a FM sports/talk station that would be the flagship home for Chicago White Sox & Chicago Bulls radio broadcasts. That deal, although never official, has since disintegrated.
Still, a sale of one or both stations -- both iconic Chicago rock radio stations, with strong frequencies -- could bring in a sizable amount of money for a corporation soon to be desperately seeking cash to hold creditors off.
In the meantime, it would not be a surprise to many if the company decides to do a little management housecleaning at the under-performing stations in the coming weeks.
Making matters worse for Jeff Smulyan, the news of today's canceled sale sent Emmis stock prices tumbling even further today, down to only $1.21. Dramatic moves will soon have to be made to make Wall Street shareholders happy and confident in the company once again.