In the latest twist in its troubled recent history, Web advertising seller MaxWorldwide is mulling over a deal to be bought out by a dissident group of shareholders.
Dallas, Texas-based Newcastle Partners, which said it is a member of a shareholder group calling itself the MaxWorldwide Full Value Committee, reiterated an earlier public offer to pay $0.75 per share in cash for all of the company’s outstanding stock.
The payment represented a 74 percent premium to the New York-based company’s stock price of $0.43 on Sept. 18, the day of the first offer.
According to documents since filed with the Securities and Exchange Commission, the MaxWorldwide Full Value Committee, which also includes investors Couchman Partners, Furtherfield Partners, DB3 Holdings and Skiles Partners, plans to nominate seven new members of the company’s board of directors, a slate that would include many of the managing partners of the investment groups.
The filings also indicate that the Committee controls about 11.2 percent of MaxWorldwide’s stock.
Hours after receiving the communique, and in its first public response to Newcastle, MaxWorldwide’s lawyers responded publicly that the company’s board of directors is considering the offer — despite the long list of criticisms and demands made in the letters by Newcastle’s general manager, Mark Schwartz.
In its letters, Schwartz said the Committee insisted that MaxWorldwide release its delayed second-quarter financial report — held as part of an accounting investigation — and disclose cash balances, which he said shouldn’t be affected by the investigation.
He also demanded that the firm announce when it expects to release prior quarters’ restated results, that MaxWorldwide clarify the status of ongoing investigations by the National Association of Securities Dealers and the SEC, and that it explain the strategy behind its recent corporate moves — which include buying DoubleClick’s media business.
“We are firmly committed to moving forward with our plans to acquire MaxWorldwide,” Schwartz wrote in the letter. “Failure to accept our plan or to provide a realistic, actionable alternative in the immediate future would reflect a complete disregard of the fiduciary duties that the Board owes to MaxWorldwide’s stockholders.”
Schwartz was not available to answer questions by press time. A spokesperson for MaxWorldwide said the firm couldn’t comment beyond the open exchange.
Since the onset of tough economic conditions in 2000, Newcastle has adopted attempted to wrest control of a number of firms in which it’s an investor. The group failed to take over printing technology firm Nashua , but took board positions at it and at Hallmark Financial Services. It also threatened a proxy battle to elect its own slate of nominees to agricultural tool maker Gehl’s
board of directors, but ultimately sold its stake to another investor.
The company also owns stakes in other small firms, including TSCI, Inspire Insurance Solutions and Vestcom International .
The development comes as the most recent installment in the often-controversial story of MaxWorldwide, which changed its name from L90 earlier this year as it attempted to relaunch itself after acquiring DoubleClick’s media practice.
MaxWorldwide also had been aiming to distance itself from the myriad troubles surrounding L90. Last year, a number of company executives — including co-founder John Bohan — resigned shortly before L90 came under investigation by the SEC regarding improperly-booked revenue during late 2000 and the first three quarters of 2001. The investigation scuttled the firm’s plans to merge with Web publisher eUniverse .
In May, L90 restated earnings for some of the quarters in question, and said it would continue looking for accounting irregularities.
Two months later, the company announced its transaction with DoubleClick and its name change, with executives calling the development an opportunity to move on. But in August, the company was delisted from Nasdaq because it did not file a quarterly report on time.
MaxWorldwide had said it held off on the filing because of new accounting inconsistencies discovered by PricewaterhouseCoopers, which had replaced Arthur Andersen as auditor following the earlier accounting misclassifications.
