Granath Seeks $100M 'Blank Check’9/30/2005 8:00 PM Eastern
ESPN chairman emeritus Herbert Granath has teamed up with four other media and finance executives to form Media & Entertainment Holdings Inc., a special-purpose acquisition company that aims to raise as much as $100 million for the purpose of buying media assets, including cable-content distributors.
In a prospectus filed with the Securities and Exchange Commission Sept. 9, Media & Entertainment Holdings said it would offer 15 million shares at $6 each, for a total of $90 million. When underwriter’s overallotments are included, the amount could possibly rise to $103.5 million.
New York boutique investment bank Jessup & Lamont Securities Corp. will underwrite the offering.
|Media & Entertainment Holdings Inc.|
|Without Over Allotment||With Over Allotment|
|Source: SEC documents
|Gross proceeds||$90 million||$103.5 million|
|Underwriting discount||$6.3 million||$7.245 million|
|Offering expenses||$1.42 million||$1.42 million|
|Held in trust||$79.65 million||$92.2 million|
|Not held in trust||$2.62 million||$2.62 million|
|Total net proceeds||$82.27 million||$94.83 million|
MANY CONTENT TARGETS
In the prospectus, Media & Entertainment Holdings said it would target broadcast television; cable, satellite and terrestrial content delivery; film, television and audio content production and distribution; newspaper, book, magazine and specialty publishing; motion picture exhibition and related services; radio; video-game production and distribution; Internet media production and distribution advertising agencies; recorded music; and live-event entertainment and venue management.
The company has not begun to look at any assets — it is prohibited from doing so by law. But once the initial public offering is completed — expected by early next year — Media & Entertainment Holdings can begin its search.
The group will have to act quickly, though. According to the prospectus, the company has 18 months to make a deal, or return the money raised to shareholders, less any fees and expenses.
Special-purpose acquisition companies (SPACs) have become a common vehicle for raising cash for acquisitions. About 33 have been registered with the SEC and expect to raise $2.9 billion, according to agency documents.
Essentially, SPACs work this way: Once the money is raised, about 10% goes to the underwriter and the remaining amount is put in escrow. Once an acquisition is made — for at least 80% of the money raised — management of the SPAC receives 20% of the profits and investors receive ownership in the acquired company.
Media & Entertainment Holdings president and chief operating officer Harvey Seslowsky said that there is really no limit on the size of the company Media & Entertainment Holdings can acquire.
“Let’s say we raise $100 million,” Seslowsky said. “That means we can spend at least $80 million [on an acquisition]. But with borrowings plus stock, you can leverage that money. There really is lots of latitude.”
Investors in SPACs (also called blank-check companies) are mainly investing in the management team, which usually includes people with extensive experience in the respective industry.
Granath, 77, is chairman and CEO of the venture and has a storied history in the television industry. A 35-year veteran of ABC television, Granath served as chairman of sports-programming network ESPN for 16 years.
Other Media & Entertainment Holdings executives include Seslowsky, who also is president of Transmedia Corp., a media consulting firm, and has served as executive vice president of worldwide sales and distribution for video retail giant Blockbuster International. Other executives are executive vice president and chief financial officer Robert Clauser, lead strategy partner of Accenture Ltd.’s media and entertainment practice; executive vice president and secretary Bruce Maggin, vice president, secretary and a managing member of The H.A.M. Media Group LLC, an international investment and advisory firm specializing in the entertainment and communications industries; and director Richard Weden, who served as vice president and director general of American Express International Services in Moscow from 1995 to 2004.
Seslowsky said the decision to start the SPAC was made because of the opportunity the company saw in the sector.
“All of us have known each other for many years,” Seslowsky said. “We get along very well and have a great deal of experience to offer our investors. There is a tremendous amount of opportunity in this industry.”
Another media SPAC set up last year by longtime cable executive Rick Michaels — CEA Acquisition Corp. — is in the process of closing its fund after agreeing to acquire a medical software company in August.
WHAT A CEA FUND BOUGHT
CEA Acquisition, formed in February 2004 by Michaels, the chairman of cable brokerage firm Communications Equity Associates, agreed to buy etrials Worldwide Inc., for about $24 million. CEA Acquisition raised $25 million in its SPAC last year.
Michaels said that while medical software is a far cry from media, it does fit the original criteria of CEA Acquisition in that it was looking for fast-growing companies in the media, Internet and software space.
He added that CEA Acquisition did look at several U.K. media properties, but passed after they could not provide U.S. GAAP (Generally Accepted Accounting Principals) financials.
Michaels said that CEA Acquisition should close the etrials deal in February. After that, the CEA Acquisition SPAC will be shut down, and he could possibly look at forming another such vehicle.
While Michaels couldn’t speculate on what type of properties the new SPAC would look to acquire, he added that it could look at media companies again.
“Obviously, we might go back over plowed ground,” Michaels said.