IRI discussed its proposed acquisition by investor groups Symphony Technology Group and Tennenbaum Capital Partners in a June 30 conference call. After major shareholders sharply criticized the deal, IRI held a second call July 1.
That didn't satisfy several investors, who still indicated they'd oppose the tender offer set to commence by July 14. "To heck with the [lawsuit proceeds]," said Dale Benson, chief investment officer of Benson Associates, owner of 9% of IRI shares, on the July 1 call. "We're getting screwed with respect to the fundamental valuation."
Under the proposed deal, Symphony and Tennenbaum would pay $3.30 per share, or around $100 million in cash, and contribute another $10 million toward legal fees in IRI's lawsuit against ACNielsen, set for trial in September 2004. Shareholders also would get non-transferable contingent value rights entitling them to 60% of net proceeds in any future judgment or settlement. Symphony and Tennenbaum would get the rest. One of IRI's law firms would get a 5% contingency fee prior to the distribution.
Lose or win
Stoked by what IRI termed favorable pre-trial rulings and the setting of a long-awaited trial date, its stock rose 91% to $2.98 a share between April 29 and June 27, prior to the acquisition announcement. IRI seeks more than $350 million in the suit, subject to possible trebling-which would amount to more than 10 times the cash value of the tender offer. The acquisition provides a 10.7% premium to the pre-announcement price, but is well below the 52-week high of $9.08 and less than 20% of IRI's 2002 revenues of $559 million.
"The potential payoffs [from the lawsuit] are huge," said IRI Chairman-CEO Joe Durrett. "It dwarfs any value the company has. At the same time, it's speculative. You either lose or you win."
"It's a bit of an unusual transaction with these [contingent value rights]," said Bob Evans, managing director of Symphony, adding that he believes investors will come around once they understand it better.
A spokesman for VNU said the proposed acquisition doesn't change the facts of the case, which he termed "without merit."
"This was as public an offer as I can think of," Mr. Durrett said of the shopping of IRI announced in February. "Even now there's an opportunity for you to top what's here. There's a $4 million breakup fee I think is digestible."