Emmis Communications Corp. announced after Thursday’s close that it has finalized the sale of three radio broadcast stations to Merlin Media, LLC. Emmis also sold a controlling interest in Merlin Media to private equity firm GTCR of Chicago and Randy Michaels.
Stations subject to the transaction were WKQX-FM and WLUP-FM, both of Chicago, and WRXP-FM of New York.
Emmis got about $120 million in cash from the sale, net of transaction expenses, and still owns $28.7 million of preferred equity plus 20.6% of the common equity interests in Merlin Media. Emmis used the cash to repay roughly 38% of its term loans under a senior credit facility. The deal has been pending since June 21.
Emmis CEO Jeff Smulyan saw the deal as freeing the company for growth. “While it is difficult to part with these stations, we are pleased to remain involved as an investor in Merlin Media. The proceeds of the sale allow us to significantly delever the company and evaluate a variety of exciting opportunities for the next era of growth at Emmis,” he stated.
The deal was shepherded by Paul, Weiss, Rifkind, Wharton & Garrison, LLP and Wiley Rein, LLP as legal advisers, with Moelis & Company as financial advisor.
The deal’s completion date came with an irony. The day before, on Wednesday, Nasdaq notified Emmis that its shares faced delisting due to non-compliance with Nasdaq Marketplace Rule 5450(a)(1) (the Minimum Bid Rule). In other words, company shares had closed below the minimum $1.00 per share bid requirement for 30 consecutive business days (starting July 19). Nasdaq informed the company that it has until February 27, 2012 to bring its share price up to avoid delisting. If the share price closes at $1.00 or more per share for at least 10 consecutive business days before that date, the stock will continue to trade on the senior exchange.
“The notice from Nasdaq was not a surprise,” said Smulyan, “but the timing is ironic coming the very day before we closed the Merlin transaction and repaid approximately $120 million of our debt. We are optimistic that the performance of our businesses and our continued efforts to rationalize our balance sheet will enable us to achieve compliance with the Minimum Bid Price Rule before February 27, 2012.”
Emmis stock closed Thursday at $0.66 on volume of 41,674 shares, but got a strong after-hours boost following its announcement. In AH trading, prices rose to $0.73, more than a 10% gain. While still a good shake away from meeting Nasdaq’s requirements, shares of EMMS are holding up from yesterday’s close, trading in the area of 70 cents midway through Friday’s trading day.
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