CKX, Inc.: Taking American Idol, Elvis, Ali Mostly Private (CKXE)

It is very frequent that ‘going private’ transactions are bad for shareholders, or at least not rewarding enough.  That does not appear to be the case today in CKX, Inc. (CKXE-NASDAQ) as Robert Sillerman is taking the company private.  There is a $13.75 cash and unit distribution to shareholders.  That is why shares are trading at $14.37, almost 5% over the cash buyout component.

What shareholders will receive along with the $13.75 per share check is shares in FX Luxury Realty, LLC, an affiliate of Robert F.X. Sillerman that has significant real estate interests in Las Vegas and has entered into licenses to use certain intellectual property rights of CKX associated with Elvis Presley and Muhammad Ali in the development of real estate and attraction based projects.

The distribution of shares in FX Luxury Realty allows CKX stockholders to receive a share on a 1:1 basis for the exploitation of CKX’s Elvis Presley and Muhammad Ali assets through FX Luxury Realty’s real estate projects.  These are expected to include Elvis Presley- and Muhammad Ali-themed attractions as well as FX Luxury Realty’s other real estate ventures.  Also on June 1, 2007, CKX acquired 50 percent of FX Luxury Realty LLC for cash consideration of $100 million. The distribution by CKX to its stockholders of half of CKX’s interests in FX Luxury Realty is a condition to the closing of the merger transaction.  Please read through that press release because the other interest is a partial transaction and this involves Riviera Holdings Corp. (RIV-AMEX) going private as well.

The merger agreement contains a 45-day "go-shop" provision pursuant to which CKX, acting through a special committee of independent directors and its financial advisor, will solicit competing proposals. During the "go shop" period no termination fee would be payable to 19X. The merger agreement does not contain a financing contingency. Mr. Sillerman, Mr. Fuller and members of senior management have agreed to vote their shares in favor of certain competing offers that the special committee deems more favorable, from a financial point of view.

CKX owns the rights to the name, image and likeness of Elvis Presley, the operations of Graceland, the rights to the name, image and likeness of Muhammad Ali and proprietary rights to the IDOLS television brand, including the American Idol series in the United States and local adaptations of the IDOLS television show format which, collectively, air in over 100 countries around the world.

CKXE had a prior 52-week trading range of $8.77 to $14.48, and shares briefly traded over $15.00 today.  It should be known that this briefly traded above $25.00 back in 2005 when it came out that the company had purchased the Elvis rights.  This purchase doesn’t look like a hounddog deal on the surface.

Jon C. Ogg
June 1, 2007

Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.