Intermix’s plans to sell to Rupert Murdoch were challenged by Brad Greenpan (Intermix’s former CEO), who made a counter-offer for Intermedia. Intermix has rejected the offer, citing the following reasons:
- Mr. Greenspan’s proposal does not compare favorably to the pending transaction with News Corporation. Mr. Greenspan would provide cash liquidity for only approximately one-half of the common stock held by Intermix’s stockholders, with the remaining stockholders continuing to hold equity securities in a post-transaction concern with a diminished public equity float.
- The proposal entails a number of significant and unacceptable risks, including uncertainty relating to financing for the transaction. Freemyspace, LLC would need to raise over $300 million to complete the acquisition. Mr. Greenspan has indicated that these funds will be provided by “several private equity investment firms” that may provide commitments to fund the acquisition only after they have been provided with detailed financial data regarding Intermix that is not currently publicly available. Mr. Greenspan has not identified any of his potential sources of funds and the Intermix board is unable to assess whether they are credible funding sources.
- The proposed transaction with Mr. Greenspan offers significantly less certainty of closing and would, even if consummated, take months to complete (in comparison to the transaction with News Corporation, which could be completed in a matter of days, subject to the approval of our stockholders).
- Although existing stockholders would retain an equity interest in a portion of Intermix, the proposal does not provide any operating plan for Intermix, other than to indicate that Mr. Greenspan would propose to cause Intermix to sell off “non-core assets,” focus on the Myspace.com business and ask the management team of Intermix’ subsidiary, MySpace, Inc., to become the executive team of Intermix.
- The return of Mr. Greenspan to a control position over Intermix could create morale issues with a significant number of Intermix employees, including members of MySpace’s management, and potentially harm the company’s business, particularly in light of the fact that when Mr. Greenspan was removed as Intermix chairman and asked to resign as chief executive officer, the company’s common stock traded for less than $2 per share, the company was struggling with an accounting restatement, its common stock had been delisted from the NASDAQ Small Cap Market, it was the subject of an informal investigation by the Securities and Exchange Commission, various stockholder lawsuits relating to the restatement had been filed, and the company was losing money.
Note: I had inadvertently titled Intermix as “Intermedia” in a previous version of this blog. Apologies.