SFX Closing Confusion

SFX Entertainment said July 27 that it hasn’t received any formal competing offers, putting the $490 million sale of the company to CEO Robert Sillerman closer to closing – maybe.

Maybe, because in its announcement that no one stepped up with a competing bid for the company, SFX said it received “several indications of interest” in the potential sale of various parts of its business, which remain under review.

A potential spinoff of SFX assets isn’t the only question on the table, however. Sillerman is now under a 15-day deadline to disclose how he intends to deliver financing on his cash offer of $5.25 per share – a deadline that was extended from 10 days on July 10. In addition, Sillerman has yet to identify banks or equity partners that would finance the deal, according to Forbes, raising questions about his ability to make good on the cash tender. SFX announced plans in May to sell itself to Sillerman, with a valuation at $774 million including SFX’s debt, cash and cash equivalents, stock options and other items

. The company’s IPO raised $1 billion at $13 per share. At press time, SFXE was trading at around $3.15 per share. Under the terms of the “go shop” period, SFX had the right to seek competing offers until July 24. Sillerman and the board valued a deal at $774 million including SFX’s debt, its cash and cash equivalents, stock options and other items.

A stock offering conducted by SFX in June for less than Sillerman’s offer to shareholders only served to further confound investors, according to Forbes. One of the equity investors in that deal was Virtual Point Holdings, an unknown firm operating from a P.O. box near Atlanta. Adding another layer of confusion to the state of SFX, the company in mid-July announced a series of management changes and a partnership between its Beatport service and Spotify.

Forbes speculates the suggestion that SFX is weighing a sell-off of one or more of its divisions is a hint that Sillerman’s offer may be in trouble. If he’s unable to pull off a close, expected in the fourth quarter, he is liable to cough up a $31 million reverse termination fee. SFXE shares tanked after the July 27 announcement, dropping 13 percent to $3.35 – some 40 percent below Sillerman’s tender price.