On March 3, 2013, InterMedia Partners
VII, L.P. and InterMedia Outdoor Holdings, Inc. ("IMOH") submitted a letter to
the members of the board of directors of Outdoor Channel Holdings, Inc.
OUTD, expressing their belief that the conditional proposal to
acquire all of the outstanding common stock of OUTD submitted by Kroenke
Sports & Entertainment, LLC cannot constitute a "Superior Proposal" (as
defined in OUTD's Merger Agreement, dated November 15, 2012, with IMOH and
certain affiliated entities) relative to the IMOH cash and stock transaction.
A copy of the Letter is included below.
INTERMEDIA PARTNERS VII, L.P.
INTERMEDIA OUTDOOR HOLDINGS, INC.
1040 Avenue of the Americas
New York, NY 10019
March 3, 2013
Board of Directors
Outdoor Channel Holdings, Inc.
43445 Business Park Drive, Suite 103
Temecula, CA 92590
Dear Members of the Board of Directors:
We are aware of your determination to engage in discussions with Kroenke
Sports & Entertainment, LLC ("KSE") regarding their conditional proposal to
acquire all of the outstanding common stock of Outdoor Channel Holdings, Inc.
("OUTD") in an all-cash transaction at a price of $8.75 per share (the "KSE
Proposal").
Despite the Board's determination that the KSE Proposal "would reasonably be
expected to result in a Superior Proposal" (as defined in OUTD's Merger
Agreement, dated November 15, 2012, with InterMedia Outdoor Holdings, Inc.
("IMOH") and certain affiliated entities (the "InterMedia Agreement")), we are
writing today to make unequivocally clear our position that the KSE Proposal
cannot constitute a Superior Proposal relative to the IMOH cash and stock
transaction. Our transaction, which can be consummated in less than two
weeks, provides OUTD stockholders with a more attractive and valuable
combination of cash today and stock in a much larger and more valuable
enterprise.
KSE's proposal letter to OUTD asserted that the valuation in the fairness
opinion delivered by Lazard Freres & Co LLC ("Lazard") on November 15, 2012 in
respect of our transaction supports their contention that the KSE Proposal is
superior. However, since the delivery of the fairness opinion on November 15,
2012, multiples for comparable companies have expanded meaningfully and
therefore the Lazard fairness opinion no longer reflects the current value of
the IMOH transaction. Had the valuation of the stock portion of the IMOH
transaction been refreshed for the impact of current multiples, we believe
OUTD would have seen that the KSE Proposal lands at the bottom of the range of
values for the pending transaction with IMOH. Further, we believe that the
fairness opinion understated the value of synergies and when those synergies
are allocated to each segment and afforded current market multiples, there is
conservatively an incremental 30-40 cents per share of value. Also, our
significant ongoing work on the planned integration of the three merging
companies has, in our view, yielded additional potential synergies of $2–$4
million.
Thus, utilizing current multiples, the allocation of synergies to the segment
with respect to which they are applicable and the most recent estimates of
achievable synergies, it is clear that the KSE Proposal falls below the bottom
end of the range of the pending transaction with IMOH and is nearly $2.00
below the high end of the range. Furthermore, the KSE Proposal deprives the
OUTD stockholders of the significant equity upside which the combined
integrated company can deliver in the future.
While we respect the Board's obligation to fulfill its fiduciary duties to
OUTD's stockholders it should be mindful of its obligations under the
InterMedia Agreement and our belief that the KSE Proposal did not and cannot
constitute a "Superior Proposal." We are confident that our business
combination transaction delivers far greater value to OUTD's stockholders
today than the KSE Proposal.
Sincerely,
INTERMEDIA PARTNERS VII, L.P.
By: /s/ Peter Kern
Name: Peter Kern
Title: Managing Partner
INTERMEDIA OUTDOOR HOLDINGS, INC.
By: /s/ Peter Kern
Name: Peter Kern
Title: President
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