Channel Islands investment company Longkloof Ltd. increased its unsolicited bid for New Frontier Media to $1.75 per share, providing a boost to the stock and putting pressure on the adult services provider to make a decision soon.
New Frontier shares rose 12.5% (19 cents each) to $1.71 each on May 23 on the news. The stock closed at $1.71 each on May 24, unchanged.
Longkloof made its first unsolicited offer for New Frontier in March for $1.35 per share. That was followed by a competing offer from Playboy TV distributor Manwin Holdings for $1.50 per share in April.
New Frontier, which owns adult pay-per-view channels Penthouse TV, The Erotic Networks, VaVoom, Juicy and XTSY, formed a special committee of independent directors in March to evaluate the proposals.
In a letter to New Frontier's board of directors on May 23, Longkloof expressed its frustration with what it called the special committee's "inaction." Longkloof added that its all-cash offer represents a 60% premium to New Frontier stock on Feb. 15, the date Longkloof first contacted New Frontier expressing its interest in an acquisition.
Longkloof also took exception to statements made by the Special Committee chairman Alan Isaacman earlier this month, after receiving a proxy from Longkloof parent - South African investment company Hosken Consolidated Investments - to nominate four members to New Frontier's board of directors.
In a press release, Isaacman said that Hosken's has yet to respond to a request by the special committee for more detailed information on its offer. He called the investment company's proxy a "transparent attempt to take control of New Frontier Media," by placing four of its handpicked members on New Frontier's six-member board, who would then be in position to favor the Hosken offer.
"It is unfortunate that rather than choosing to engage constructively with the Special Committee's financial advisor, Hosken has chosen to launch a potentially costly and distracting proxy contest," Isaacman said in the statement.
Longkloof said the chairman mischaracterized its intentions, adding they are only to acquire New Frontier in an all-cash offer that represents a substantial premium for all shareholders. Longkloof already is New Frontier's largest individual shareholder, with about 15% of its outstanding stock.
In the letter, Longkloof said it was willing to allow for a "go shop" period in a definitive agreement and to even participate in an auction process to ensure that shareholders receive full value for their holdings.
"All we ask is that the members of the special committee act quickly, exercise their fiduciary duties and live up to their mandate before further shareholder value is destroyed," Longkloof said in the letter.