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Image, Nyx Merger Given 5 p.m. (PST) Deadline

4 Mar, 2009 By: Erik Gruenwedel

Rollercoaster merger talks between Image Entertainment and Nyx Acquisitions March 4 now have a 5 p.m. (PST) deadline.

Chatsworth, Calif.-based Image said Nyx, an affiliate of San Francisco-based Q-Black LLC, has until the end of the business day to deposit an additional $500,000 to the current $1.8 million business interruption fee account to avoid terminating the breached merger agreement.

Image said it would instruct the trustee of the interruption fee account to immediately release $1.8 million in funds after Nyx failed to deposit the $500,000 into the account by March 2. The company promised and failed again to remedy the situation by March 3.

Image had agreed to extend to March 20 the merger deadline with Nyx in exchange for $500,000 added to the $1.8 million fee.

Under terms of the deal, Image had the right to terminate the merger and collect the interruption fee in addition to the aforementioned $500,000 if Nyx failed to deposit the funds on time.

Image shareholders formally approved the acquisition — originally slated to close Feb. 26 — which called for Nyx to pay Image shareholders $2.75 per share in cash ($60.2 million), in addition to outstanding debt, for a total purchase price of $100 million.

Nyx had a final option to extend the closing date to March 26, if it added another $500,000 for a total $2.8 million interruption fee by March 19.

Regardless of the outcome, Wall Street issued its verdict undercutting Image shares nearly 20% to 95 cents in midday trading.

Analysts who had questioned Nyx’s ability to secure funding in the current credit market said the likelihood of a second failed merger did not sit well.

A failed $130 million merger attempt by BTP Acquisition Co. in 2007 ended in litigation.

“It’s a black eye for sure,” said an analyst who wished to remain anonymous, citing the ongoing negotiations.

The analyst said the deal didn’t appear airtight when first announced last November, with Nyx allowed to exit the deal minus the business interruption fee. He said the back-and-forth press releases underscored the deal’s weakness, in addition to the deteriorating credit market.

“They could have negotiated for a tighter contract,” the analyst said.


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