YNOT – Manwin has made a cash offer to acquire all outstanding shares of common stock in publicly traded New Frontier Media Inc. Managing Partner Fabian Thylmann indicated Manwin will pay $1.50 per share for the Boulder, Colo.-based adult entertainment company that trades on the NASDAQ under the symbol NOOF.
Manwin’s offer represents a 35-percent premium over the six-month historical average of New Frontier’s share price as of March 8 and is 15 cents per share higher than a rival cash offer tendered March 9 by investment holding company Longkloof Limited, based in the British Channel Islands.
Both unsolicited offers are contingent upon on due-diligence reviews of New Frontier’s operations, books and records and the satisfaction of “customary conditions.”
New Frontier hasn’t jumped at either offer. Although the company had not responded to Manwin’s announcement by posting time, earlier this month the board of directors formed “a special committee of independent directors” to review the hostile bid from Longkloof, which holds about 15.7 percent of New Frontier’s stock.
In a March 9 letter to the New Frontier board of directors, Longkloof representatives noted dissatisfaction with company management and compensation for non-employee directors, who have received an average stipend of more than $90,000 annually for the past five years. In one year, an attorney on the board of directors received $400,000 in non-employee compensation, according to published regulatory reports. Directors are not required to be stockholders, and the tone of Longkloof’s letter indicates the holding company believes the non-shareholder members of the board of directors are attempting to loot New Frontier.
“We are extremely concerned about the capabilities and behavior of NOOF’s current board,” the letter stated. “We do not believe the current board is capable or willing to undertake the actions necessary to enable NOOF to compete in the future, as the track record established by the current board over the past several years has been dismal. Under the board’s stewardship, we have watched the company’s stock price decline over the past five years from above $9 per share to its current price of $1.13. Unfortunately, we believe the current board is more focused on maintaining its excessive director fees and engaging in related party transactions rather than running the company in the best interest of the stockholders….
“While we remain optimistic that we can reach an agreement that benefits all of NOOF’s stockholders in a timely manner, we are committed to protecting the value of our investment,” the letter continued. “Consequently, we are prepared to pursue any and all actions available to us in order to ensure that we maximize stockholder value. We can no longer tolerate this fatal combination of exorbitant board fees and unfettered self-interest. Although you dismissed our initial overture as a non-offer, we would not be surprised if this board found a way to further enrich itself at stockholder expense, given that our offer represents a clear threat to those exorbitant fees…. [W]e feel that our request … is both fair and necessary given this history of excess.”
Manwin took another tack in its approach, stating that it is highly impressed with New Frontier, its board of directors, management team and operations but believes the company has been undervalued in the public markets because of its size and market capitalization.
Manwin’s proposal indicates the company believes that by combining New Frontier’s transactional television business with its own and by leveraging Manwin’s online assets, including both content and traffic, the combined operation will be able to offer even more compelling programming to pay-TV distributors and drive additional customers to the pay-TV experience.
“Our recent experience with Playboy TV proves to us the value of TV as a distribution platform, and we have been seeking ways to foster additional business in that segment of the industry,” Thylmann said in a prepared statement. “New Frontier Media’s business is a natural fit which should create synergies immediately benefiting both Manwin’s pay-TV providers and their customers.”
Manwin acquired an “operating partnership” in Playboy’s online and TV divisions in August 2011. The Luxembourg-based company, which claims to be the largest single operator of adult websites in the world, has been on an acquisitions binge since at least the beginning of 2011, most recently acquiring Los Angeles-based adult studio Digital Playground in March 2012. Prior to that, Manwin acquired longstanding online operations including Twistys and Brazzers, in addition to a sizable collection of so-called tube sites including YouPorn, GayTube, SexTube and TrannyTube.
