MOUNT
KISCO, N.Y., Sept. 12,
2022 /PRNewswire/ -- Edenbrook Capital, LLC
(together with its affiliates, "Edenbrook"), one of the largest
public shareholders of Hemisphere Media Group, Inc. (NASDAQ: HMTV)
("Hemisphere" or "the Company"), with ownership of nearly 15% of
the publicly traded A shares, today announced that it has delivered
the following letter to the Hemisphere Board of Directors.
September 12,
2022
Peter Kern
Chairman of the Board
Hemisphere Media Group, Inc.
c/o InterMedia Advisors, LLC
228 Park Avenue South, PMB
67521
New
York, NY 10003-1502
Dear Peter:
Last Thursday was a sad day for shareholder democracy.
After market close on September 8,
2022, Hemisphere Media Group, Inc. ("the Company" or
"Hemisphere"), for which you serve as Chairman, issued a press
release with, what we believe to be, the misleading title
"Hemisphere Media Group Stockholders Approve Acquisition by Gato
Investments LP, a Portfolio Investment of Searchlight Capital
Partners, L.P." Further, the body of that press release
claims that "Hemisphere Media Group, Inc.… today announced that its
stockholders approved the acquisition of the Company by a
subsidiary of Gato Investments LP ("Gato"), a portfolio investment
of Searchlight Capital Partners, L.P. ("Searchlight")."
Why is this misleading? Because the majority of the
stockholders of the Company's publicly traded Class A shares voted
against the transaction for the Company to be taken private by
insiders at a price that we believe (as we evidence in our prior
letters, here, here and here) significantly undervalues the Company
(the "Insider Takeover"). As shown in the Form 8-K filed by
the Company that same afternoon, 11,884,980 shares were voted
against the merger. These 'No' votes were presumably (and
logically) all Class A stockholders because the privately held,
super-voting Class B shares are all held by insiders who presumably
supported the deal (and because that's how the math works out when
you back out the B share count). Per the same document, there
were 20,827,861 Class A shares outstanding as of the August 5, 2022 record date. So over 57% of
the public Class A stockholders voted against the deal. But
that number is even higher, because the Class A share count
includes over 1,950,000 shares held by officers, directors and
insiders of the Company, per Bloomberg data. Which means
if you exclude those insiders who are not disinterested
stockholders in the traditional sense, then it seems 63% of public
stockholders likely voted against the deal.
Yet you claim that stockholders "approved the
acquisition." The only reason this deal was "approved" is
because you have included the Class B stockholders, with their 10
votes per privately held share, in the calculation. While it
is true that your calculation excludes the shares held by insider
Searchlight, the largest beneficiary of the Insider Takeover, we
believe it is also true that all Class B shareholders,
not just Searchlight, are interested parties who stand to benefit
from the transaction and should have been excluded from the
count, and had you not included the Class B shareholders in
your calculation, the vote tally would have been 63%
against the merger. Had the proxy advisory firms
publicly opined on this Insider Takeover, which clearly benefits
the few at the expense of the many, we strongly believe they would
have recommended shareholders vote "No" and that, in turn, the
passive public holders in the Company would have voted No as
well. Because the fundamental question remains: Why would a
stockholder, unless such stockholder was an interested stockholder,
support a transaction with a confirmably low valuation (see our
previous letters) while simultaneously ignoring or rejecting higher
bids for the Company?
We believe that this transaction which you have led, and stand
to benefit from disproportionately as an insider, exemplifies
terrible corporate governance and an abrogation of fiduciary
responsibility by the Board of Directors of the Company. As
we've laid out in previous letters to you and the Special
Committee, you had better paths to go down, you simply chose not to
pursue them. You could have sold your streaming business
Pantaya separately in a more public auction, rather than giving it
to other insiders in a sweetheart deal. You could have kept
the cheap, highly cash-generative remainder of the Company as a
standalone public company so that all public stockholders could
have benefitted from future value creation. Instead you chose
the expedient and, in our view, self-serving path: after driving
the stock down through a botched secondary and poor communication
(see our previous letters), you allowed insiders to benefit from
the very chaos they created and effectively swipe the company from
the public shareholders who had financed the very businesses the
insiders are getting for a song, while blocking other bidders from
paying a higher price.
Sincerely,
Jonathan Brolin
Founder and Managing Partner
About Edenbrook Capital
Edenbrook Capital, based in Mount
Kisco, NY, takes a private equity approach to public
markets, principally through concentrated, long-term investments in
small and mid-cap companies.
Disclaimer
This material does not constitute an offer to sell or a
solicitation of an offer to buy any of the securities described
herein in any state to any person. In addition, the discussions and
opinions in this letter and the material contained herein are for
general information only, and are not intended to provide
investment advice. All statements contained in this letter that are
not clearly historical in nature or that necessarily depend on
future events are "forward-looking statements," which are not
guarantees of future performance or results, and the words "will,"
"anticipate," "believe," "expect," "potential," "could,"
"opportunity," "estimate," and similar expressions are generally
intended to identify forward-looking statements. The projected
results and statements contained in this letter and the material
contained herein that are not historical facts are based on current
expectations, speak only as of the date of this letter and involve
risks that may cause the actual results to be materially different.
Certain information included in this material is based on data
obtained from sources considered to be reliable. No representation
is made with respect to the accuracy or completeness of such data,
and any analyses provided to assist the recipient of this material
in evaluating the matters described herein may be based on
subjective assessments and assumptions and may use one among
alternative methodologies that produce different results.
Accordingly, any analyses should also not be viewed as factual and
also should not be relied upon as an accurate prediction of future
results. All figures are unaudited estimates and subject to
revision without notice. Edenbrook disclaims any obligation to
update the information herein and reserves the right to change any
of its opinions expressed herein at any time as it deems
appropriate.
Media Contact:
Michael Goodwin
mgoodwin@stantonprm.com
646-502-3595
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SOURCE Edenbrook Capital, LLC