Penton Media Up for Sale
As part of the announcement, Penton stated in a financial filing that its preferred shareholders agreed on a plan Tuesday to share the proceeds of a sale with the common shareholders, who have what’s known in Wall Street circles as "holdup value";the ability to block a deal.
A special independent committee of the board was appointed to represent the common shareholders. None of the three committee members, interestingly, own any common shares of stock.
With EBITDA last year of $41 million, a sale of the company at 10-times EBITDA would yield $410 million. However, industry observers speculate that the company will perform better this year, approaching $50 million in adjusted pro forma EBITDA, thus pushing a 10-times multiple to close to $500 million.
The allocation plan, which apparently needs the approval of the common shareholders, provides them;the common shareholders;with 12.75 percent of the first $135 million of net proceeds (with a minimum allocation to the common stock of at least $14 million), 15 percent of any additional net proceeds up to $145 million, 25 percent of any additional net proceeds up to $185 million and 20 percent of any additional net proceeds over $185 million.
In short, the common shareholders would get $14 million, or 41 cents per share, for a transaction that produces net proceeds of $135 million (a sale price of around $470 million) and $28 million, or 83 cents per share, if the net proceeds are $185 million (or a total sale price of about $515 million). Penton has 34 million shares of common stock outstanding. It closed today at 26 cents.
The sale-proceeds sharing agreement seems to favor the preferred shareholders, even if it dilutes what they could get under the existing terms of ownership. In the best case scenario, the common shareholders get $27 million while the preferred shareholders;basically ABRY and its allies; get more than $150 million on an investment in 2002 of $50 million.
ABRY apparently shopped Penton last fall and speculation of a possible sale arose again earlier this year after Penton filed a preliminary proxy statement that included a request that shareholders give the board authority to implement a reverse stock split, then in a definitive proxy statement, removed the stock split proposal. Penton had a first quarter 2006 EBITDA to be $17.2 million and revenue of $54.3 million.