Shares of New Frontier Media (NASDAQ Symbol: NOOF) soared 16.8% (19 cents each) to $1.32 per share on Friday after Longkloof Ltd. launched a tender offer for the adult entertainment provider.
Longkloof currently owns about 15% of New Frontier stock. In a letter to New Frontier on March 9, Longkloof offered to pay $1.35 per share (a 26% premium to its previous day's close) for the remaining shares of the company it does not own. The total price of a deal would be about $18.8 million.
In the letter Longkloof, an investment company based in the Channel Islands, said that New Frontier's board has been unwilling to engage in dialogue regarding an acquisition, prompting the decision to make its offer publicly. The investment company criticized the board for being "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." It also lamented the decline of New Frontier's stodk price from about $9 each five years ago to its March 8 close of $1.13 per share.
New Frontier -- which owns adult pay-per-view channels Penthouse TV,The Erotic Networks, VaVoom, Juicy and XTSY -- confirmed it has received the offer and has formed a special committee of independent directors to evaluate the offer.
"The special committee and management have indicated that their review of the proposal will be conducted in a manner that will minimize any disruptions to New Frontier Media's business operations," New Frontier said in a statement.
The company said the committee is being assisted in its evaluation by legal adviser Blank Rome LLP, and is currently in the process of selecting a financial advisor. New Frontier Media is being advised by Holland & Hart LLP.