After a highly anticipated, tearful finale of another round of America Idol, CKX (Nasdaq: CKXE), the company that owns American Idol and the licensing rights to the name and images of Muhammad Ali and Elvis Presley, announced that CKX Chairman and CEO Robert F.X. Sillerman and Idol creator Simon Fuller will take the company private. The decision isn’t sitting well with at least one shareholder, who is suing CKX in the New York Supreme Court.Sillerman and Fuller made a proposal to the company’s board of directors last week, offering to buy the company’s outstanding stock for $13.75 a share in cash. The offering is a 29 percent premium over the stock’s closing price May 30, 2007, of $10.63.
CKX is engaged in the ownership, development and commercial utilization of entertainment content. The company also owns the operations of Graceland and an 80 percent interest in similar licensing agreements of Muhammad Ali. CKX acquired 19 Entertainment (now 19X Inc.) from Simon Fuller, creator of American Idol for $200 million. The company owns a share of the rights to American Idol as well as its Pop Idol in Great Britain.
So what’s next for American Idol, Elvis and Muhammad Ali? Apparently a lot. If approved, the newly private company will continue operations of brand management including plans for Elvis and Muhammad Ali themed hotels, casinos, restaurants and more. The company will also further talks to develop an Elvis-themed project over the next 15 years.
“After two successful years of developing and exploiting the assets we have acquired, during which time we have seen tremendous year over year growth, we have come to realize that there is a substantial opportunity to capitalize on the Elvis Presley and Muhammad Ali assets in real estate and location-based attractions. However, the pursuit of these opportunities would require a significant investment of capital, which could hinder our ability to grow the core area of our business and which is not consistent with the business plan that we have always described to our stockholders,” said Sillerman in a press release.
In addition of cash for their shares, investors will receive one share of CKX’s affiliate company, FX Luxury Realty which will be home to new Elvis and Muhammad Ali attractions.
But the buyout may be a bumpy ride; according to Reuters, Levy Investments Ltd. filed suit against CKX and its executives in New York Supreme Court Friday, claiming the buyout offer “grossly inadequate for CKX’s shares and materially undervalues the company.”
According to Reuters, “In the lawsuit, Levy Investments claims Sillerman and the other executives ‘are attempting to snatch the company from the public stockholders at a discount to its true value at a time when the Company’s growth prospects are very bright.’
The suit claimed the executives have breached their fiduciary duties by not fully informing themselves about other options for the company and whether it had obtained the highest possible price.”
Legal representatives for CKX declined to comment at this time but did verify the lawsuit; MN1 will follow up with an update.
Shares of CKX were down slightly today, trading at $14.47 Monday afternoon, a natural drop after soaring 35.47 percent to $14.40 Friday afternoon on word of the buyout.