La Exitosa has a MIXSHOW…

[101.9 La Kalle]

I was listening to 98.7 earlier and I heard a mixshow airing salsa (Tony Vega, Frankie Ruiz, Oscar D'Leon), latin freestyle music and disco (Donna Summer, Michael Jackson, but I couldn't remember the other artists). I'm not exactly sure who was the DJ, but he said he was live from a CompareFoods location (don't remember where in New Jersey it was). My question is, who the hell is the target audience for this station? Listeners of the classic Mega 97.9 and early 103.5 KTU?

They're on from 12-3pm from what I heard the guy say.

 

[Theater of My Mind]

Correct me if I'm wrong, but I believe this format is placeholder for Emmis to keep some cash flow going while it awaits a sale of its stations this fall. If they're running a remote broadcast from a supermarket in NJ, then that meets the short-term goal.

My understanding from past articles about this is that Emmis must sell its New York radio stations or face liquidation by August 29, as a condition of the 2023 three-year plan to take the company private. Jeff Smulyan signed a binding agreement to relinquish control over liquidation if the privatization deadline is not met.

Prior to the deadline, Smulyan is holding out for $50M because he wants the station sales to fully fund the buyout of remaining shares at what is now $7.25 per share. Selling for less means Emmis would have to drain its other assets or cash reserves to make up the difference to finish its privatization.

After August 29, the structured stock buyback program officially expires and the $7.25 per share guarantee ends. A court-appointed trustee would step in and fire-sale the New York radio stations to the highest bidder. Whatever cash ends up in the escrow account would be immediately distributed to remaining public shareholders as a dividend or partial redemption and the public company would be liquidated.

Ultimately, it's a win-win for Smulyan. If someone pays his high price before August 29, he smoothly transitions into a private tech mogul. If the deadline passes and liquidation occurs, he would scoop up the digital pieces he really wants through the bankruptcy or liquidation process. His goal is to exit the radio business and keep the digital business without taking any loss.

I'm not an economist so someone like @MarkW can correct me if I got any of this wrong. But regardless, La Exitosa isn't likely to exist for much longer unless the buyer this fall decides to keep the format.

 

[TheBigA]

Jeff Smulyan signed a binding agreement to relinquish control over liquidation if the privatization deadline is not met.

Hmm. Here's an article that lays out the agreement.

Emmis Sets Course To Go Private, With Plans To Sell New York Radio Stations.

Emmis Corp. is proposing a plan that will, if shareholders approve, see CEO Jeff Smulyan achieve his long-desired goal of taking the company private while setting it up for a

www.insideradio.com

As a condition to the adoption of the proposed amendments, Smulyan would enter into a voting agreement in which he would relinquish his Class B stock rights to block a liquidation of the company if all the Class A common stock has not been redeemed by the third anniversary.

Who would vote for liquidation? What do they get in return? The market cap now is $20 million.

The main thing is paying 7.25 for stock worth $1.55 is crazy. My expectation is he will have a new offer in August.

 

[Theater of My Mind]

Hmm. Here's an article that lays out the agreement.

It's on the Emmis website.

As a condition to the adoption of the proposed amendments, Mr. Smulyan has entered into a voting agreement pursuant to which he has relinquished his right to block a liquidation of the company if all the Class A Common Stock has not been redeemed by August 29, 2026.

Emmis Announces Results of Shareholder Meeting

For Immediate Release Contact: Emmis Investor Relations, [email protected] INDIANAPOLIS, IN — (PR Newswire – August 29, 2023) – Emmis Corporation (OTC: EMMS) (formerly Emmis Communications) announced overwhelming support from shareholders to amend its articles of incorporation, as outlined in its...

www.emmis.com

Who would vote for liquidation?

The remaining Class A shareholders are the ones who would trigger the vote.

What do they get in return?

They would get cash, more than what the stock market says the company is worth after liquidation, even if it's not $7.25 per share.

 

[TheBigA]

The remaining Class A shareholders are the ones who would trigger the vote.

They would get cash, more than what the stock market says the company is worth after liquidation, even if it's not $7.25 per share.

As I said, my expectation is he will make a revised offer in August that will satisfy the stockholders, while he retains the company.

His last two stations are worth around $25 million, which is more than the market cap. They will get whatever the proceeds are from that sale.

So the radio part of the company is liquidated. But he gets to keep the name. And as you said, this station will have a new owner.

 

[K.M. Richards]

In the meantime, to answer the original question, this sounds like a local time buy on the part of the supermarket chain. The Compare Foods website lists more than a dozen stores in the area where 98.7 can be heard; I would hazard a guess that next week there will be a similar remote from another store in the chain. Perhaps, as @101.9 La Kalle suggests, they're trying to entice the demographic consisting of former Mega 97.9 and 103.5 KTU to come to the store and maybe buy some groceries?

But, as @Theater of My Mind notes, nothing on 98.7 can be taken as an indication of anything long term.

 

[RadioGuy1864]

As I said, my expectation is he will make a revised offer in August that will satisfy the stockholders, while he retains the company.

His last two stations are worth around $25 million, which is more than the market cap. They will get whatever the proceeds are from that sale.

So the radio part of the company is liquidated. But he gets to keep the name. And as you said, this station will have a new owner.

At 25 million there will be buyers. It's still a full market FM signal in NYC.

 

[MarkW]

Correct me if I'm wrong, but I believe this format is placeholder for Emmis to keep some cash flow going while it awaits a sale of its stations this fall. If they're running a remote broadcast from a supermarket in NJ, then that meets the short-term goal.

My understanding from past articles about this is that Emmis must sell its New York radio stations or face liquidation by August 29, as a condition of the 2023 three-year plan to take the company private. Jeff Smulyan signed a binding agreement to relinquish control over liquidation if the privatization deadline is not met.

Prior to the deadline, Smulyan is holding out for $50M because he wants the station sales to fully fund the buyout of remaining shares at what is now $7.25 per share. Selling for less means Emmis would have to drain its other assets or cash reserves to make up the difference to finish its privatization.

After August 29, the structured stock buyback program officially expires and the $7.25 per share guarantee ends. A court-appointed trustee would step in and fire-sale the New York radio stations to the highest bidder. Whatever cash ends up in the escrow account would be immediately distributed to remaining public shareholders as a dividend or partial redemption and the public company would be liquidated.

Ultimately, it's a win-win for Smulyan. If someone pays his high price before August 29, he smoothly transitions into a private tech mogul. If the deadline passes and liquidation occurs, he would scoop up the digital pieces he really wants through the bankruptcy or liquidation process. His goal is to exit the radio business and keep the digital business without taking any loss.

I'm not an economist so someone like @MarkW can correct me if I got any of this wrong. But regardless, La Exitosa isn't likely to exist for much longer unless the buyer this fall decides to keep the format.

I'm not an economist, either.

I believe you are correct regarding what happens after August 29 if the repurchase of outstanding common shares is not fully completed. I have no idea how many common shares, if any, still remain outstanding.

Agreements can always be amended if parties are willing.

Could Smulyan or an entity in which he is affiliated make a bid for some or all of Emmis' assets in a Bankruptcy sale scenario? Yes. The bid process would need to be open & fair, and to avoid conflict of interest, an independent committee would presumably need to choose the winning bidder if we're talking a Section 363 sale in Chapter 11.

 

[TheBigA]

Could Smulyan or an entity in which he is affiliated make a bid for some or all of Emmis' assets in a Bankruptcy sale scenario?

I don't see that in this agreement. This is what I see:

If all the Class A Common Stock is not redeemed by August 29, 2026, all funds in the escrow account (net of reasonable reserves) would be distributed to shareholders either as a dividend or through a partial redemption of the Class A Common Stock.

I don't see anything about a bankruptcy.

The bottom line is he's not paying them $7.25 a share. I suspect he already has a buyer for the stations. I'm going to assume that he knows what he's doing, and intends to keep the parts of the company he wants. Not send them to a bankruptcy court.

 

[MarkW]

The above discussion of a potential bankruptcy, at least by me, was solely in a hypothetical context. I did not do a good job of explaining that.

Here is the company's own press release regarding the redemption agreement:

Emmis Announces Results of Shareholder Meeting

For Immediate Release Contact: Emmis Investor Relations, [email protected] INDIANAPOLIS, IN — (PR Newswire – August 29, 2023) – Emmis Corporation (OTC: EMMS) (formerly Emmis Communications) announced overwhelming support from shareholders to amend its articles of incorporation, as outlined in its...

www.emmis.com

If the company cannot honor the $7.25 per common share redemption price *and* the company has debt that needs to be discharged (and settlement is unable to be reached on an out-of-court basis), then a Bankruptcy filing would be possible.

Since Emmis has not publicly reported its financial statements for several years now, I have no idea how much debt the company currently carries on its balance sheet, if any.

If there are no debt settlement issues and the sole unresolved matter is the redemption of shares, a Bankruptcy filing becomes much less likely. I say that because the Redemption Agreement already apparently contains a mechanism for liquidating assets if the $7.25 per common share redemption price is unable to be met. I've not read the Redemption Agreement, but I would assume the liquidation procedures are well defined.

It is also unclear to me if a liquidation process automatically initiates if the common share redemption at the pre-stated price fails to occur by the August 29 deadline or if the common shareholders (excluding Smulyan) would first need to vote in favor of liquidating the company's assets. The press release simply states Smulyan, by agreement, would abstain from attempting to block a liquidation.

As you correctly note, time exists for Smulyan and the other shareholders to negotiate and possibly amend any pre-existing provisions, if desired.