Image, Nyx Merger Lives Another Day5 Mar, 2009 By: Erik Gruenwedel
Rollercoaster merger talks between Image Entertainment and Nyx Acquisitions March 5 endured further, following the receipt of partial funding to the business interruption fee account.
Chatsworth, Calif.-based Image said Nyx, an affiliate of San Francisco-based Q-Black LLC, deposited $300,000 of an additional $500,000 mandated to the current $1.8 million interruption fee account to avoid terminating the breached merger agreement. Nyx said it would deposit the remaining $200,000 by March 6.
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 the deal, Image has the right to terminate the merger and collect the $2.3 interruption fee since Nyx failed to deposit the funds by the previous March 3 deadline.
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 has a final option to extend the closing date to March 26, if it adds a final $500,000 for a total $2.8 million interruption fee by March 19.
Wall Street welcomed the news, sending Image shares up nearly 24% to close at $1.14 per share. The distributor’s stock fell more than 25% during midweek trading.
Analysts continued to question Nyx’s ability to secure funding in the current credit market.
A previous 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 only the business interruption fee. He said the back and forth press releases underscored the deal’s weakness.
“They could have negotiated for a tighter contract,” the analyst said.
Indeed, the merger is being negotiated between the Image board and Nyx representatives, exclusive of Image president David Borshell and CFO Jeffrey Framer.
“We know what’s going on when the press release comes out,” Borshell said.