New Frontier Media said Thursday that it has reached an agreement with Longkloof Ltd., the investment company that launched a hostile takeover of the adults services company earlier this year.
As part of the agreement, Longkloof, which owns about 15.9% of New Frontier stock, has agreed to immediately terminate its proxy contest, withdraw its notice of intent to elect four members to New Frontier's board of directors, and will not support any other director nominees for the remainder of the year, other than those recommended by the company. In addition, New Frontier has agreed that if it does not engage in a sale or merger by Dec. 31, Longkloof will have the right to designate one person for the board. Both parties also agreed to dismiss any pending litigation without prejudice and without any admission of wrongdoing by any party.
Longkloof launched its takeover attempt in March, offering $1.35 per share for New Frontier, at the time a 26% premium to its trading price. The Longkloof offer attracted a rival bid, from Luxembourg-based Playboy TV distributor Manwin Holdings, which offered $1.50 per share for New Frontier. In May, Longkloof sweetened its bid for New Frontier to $1.75 per share. The stock closed at $1.53 each on July 12, down 7 cents (4.4%) each.
New Frontier created a special committee of independent directors to evaluate the proposals. The special committee also said that it is exploring strategic alternatives for the company, including a sale.
"We are pleased to have reached this mutually beneficial agreement with the Longkloof parties, and believe that this settlement, which avoids a potentially costly and distracting proxy contest and the related litigation, is in the best interests of New Frontier Media and our shareholders," the Special Committee said in a statement. "With these matters now fully resolved, the Special Committee can concentrate entirely on its ongoing strategic review process, which encompasses evaluating, among other options, acquisition proposals received from the Longkloof parties and other parties."
The Special Committee is proceeding with its comprehensive strategic alternatives review process in a timely and orderly manner and will complete the process in due course. The Company cautions that there are no guarantees that the review process will result in a transaction or, if a transaction is approved by the Company's Board, whether the terms or timing of such a transaction will be approved by shareholders.