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  • Looming NOOF, Longkloof Proxy Fight Puts the Hostile in Hostile Takeover

    Longkloof Limited, one of two companies openly eyeing unsolicited buyouts of publicly traded New Frontier Media, has announced its intention to mount a takeover bid from the inside by attempting to install four allies on New Frontier’s board of directors. Four of the six seats on New Frontier’s board face election during the company’s yet-to-be-scheduled 2012 shareholders meeting.YNOT – Longkloof Limited, one of two companies openly eyeing unsolicited buyouts of publicly traded New Frontier Media Inc., has announced its intention to mount a takeover bid from the inside by attempting to install four allies on New Frontier’s board of directors. Four of the six seats on New Frontier’s board face election during the company’s yet-to-be-scheduled 2012 shareholders meeting.

    New Frontier, which trades on the NASDAQ as NOOF, fired back almost immediately, releasing a strongly worded public statement calling Jersey Channel Islands-based Longkloof and its South African parent company, Hosken Consolidated Investments, deceitful, deceptive and defamatory.

    On March 9, Longkloof — which owns an estimated 15.7 percent of NOOF’s common stock — tendered a cash offer of $1.35 per share for all NOOF shares it doesn’t already own. On March 8, NOOF’s per-share price closed at $1.13. Along with the offer, Longkloof submitted a letter accusing non-shareholder members of NOOF’s current board of attempting to loot the company by awarding themselves unreasonable non-employee compensation and perks.

    New Frontier didn’t reject the offer outright, but it also didn’t react warmly. Instead, the company’s board appointed a special committee to study the offer and Longkloof, about which little was known. The tone of New Frontier’s most recent public statement indicates the company now believes Longkloof intentionally attempted to mislead the board and NOOF shareholders by serving as a front for Hosken, which indirectly owns 100 percent of both Longkloof and another significant NOOF shareholder, Mile End Limited. Together, the three entities own at least 16 percent of NOOF’s total common stock, making them the largest voting bloc among the company’s shareholders. In addition, the Hosken-controlled entities have been engaged in an aggressive stock-acquisition program for the past 18 months.

    Longkloof’s April 27 notice of intent to nominate directors named Eric Doctorow, Mahomed Khalik Ismail Sherrif, Willem Deon Nel and Barbara Wall as the nominees. All four possess extensive entertainment industry backgrounds, and two are employees of Sabido Investments (Pty) Ltd., a media group wholly owned by Hosken. According to Longkloof’s statement, the four intend to solicit proxy votes for NOOF’s board election.

    NOOF’s current board is less than excited about that prospect.

    “Hosken's threatened proxy contest is a transparent attempt to take control of New Frontier Media by placing four of Hosken's hand-picked candidates on New Frontier Media's six-member board who would then be in a position to give favorable consideration to Hosken's unsolicited $1.35 per share offer,” said Alan L. Isaacman, an attorney, current NOOF director and chairman of the special committee that is evaluating Longkloof’s buyout offer. “It is unfortunate that rather than choosing to engage constructively with the Special Committee's financial advisor, Hosken has chosen to launch a potentially costly and distracting proxy contest.”

    Isaacman also noted the special committee’s task has been made more difficult by Longkloof’s failure to respond to New Frontier’s requests for clarification of Longkloof’s offer.

    According to NOOF’s most recent public statement,
    New Frontier Media's six directors, five of whom are independent, are all highly qualified and committed to acting in the best interests of all shareholders. New Frontier Media's board and management have a long history of maintaining an open dialogue with shareholders and engaging in a constructive manner with shareholders seeking to discuss ideas for enhancing value. For the past 18 months, since learning that affiliates of Hosken had accumulated a significant ownership position in New Frontier Media's stock, New Frontier Media's board and management have, in good faith and with an open-minded manner, engaged in several meetings with Hosken and its representatives, including a recent in-person meeting with Marcel Golding, the executive chairman of Hosken, and Hosken's U.S. representative, Adam Rothstein.

    New Frontier remains open to having future discussions with Hosken provided they are constructive. However, the disparaging and inflammatory tone of Hosken's various communications, in particular its March 9, 2012, letter and the related press release, both of which contain false and misleading statements, together with Hosken's threatened proxy contest do not promote a constructive dialogue between New Frontier Media and Hosken or its representatives.
    “The New Frontier Media board will not be distracted from acting in the best interests of, and maximizing value for, all shareholders,” Isaacman said. “We would prefer to avoid a costly and disruptive proxy contest and focus our full attention on realizing New Frontier Media's significant potential. However, we will not stand idly by while Hosken pursues its own self-interested agenda to gain control of New Frontier Media to the detriment of our other shareholders.”

    In addition to the offer from Longkloof, New Frontier also has received an unsolicited $1.50-per-share buyout offer from adult multimedia giant Manwin. That offer, too, is under evaluation.

    More about Longkloof’s proposed nominees is here. New Frontier’s most recent public statement, in its entirety, is here.
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