Vexed shareholders balk at terms of IRI sale

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Market researcher Information Resources Inc.'s search for a buyer is over-but unhappy shareholders may yet scuttle the deal, whose value hinges largely on the outcome of antitrust litigation against VNU's ACNielsen Corp.

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.

`without merit'

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."

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