New Frontier Media Launches Strategic Review, Indemnifies Board Members

Rhett Pardon

BOULDER, Colo. — Transactional TV service New Frontier Media has tapped into investment banking firm Avondale Partners to examine strategic alternatives.

The move by the adult entertainment distributor comes less than a month after it received unsolicited acquisitions bids from Luxembourg-based Manwin and its largest shareholder, London-based Longkloof Ltd.

Manwin offered to acquire the Boulder, Colo.-based company for $1.50 per share in cash, Longkloof offered $1.35.

Avondale has been picked to evaluate the company’s current long-term business plan against alternatives, including the sale of the company, that have the potential to maximize shareholder value.

Alan L. Isaacman, chairman of a New Frontier Media special committee and company board member, said that the company's future prospects are good and that there has made no decision to sell the company.

"However, in keeping with our commitment to act in the best interests of all shareholders, we have decided to undergo a thorough review of strategic alternatives to determine the best opportunities for maximizing shareholder value at this time," he said.

"Accordingly, while our financial advisor will assist us with reviewing and responding to the unsolicited acquisition proposals that we have received, as well as any other acquisition proposals that we may receive, the scope of our financial advisor’s assignment will be comprehensive and not limited to any specific vision for New Frontier Media’s future.”

Meanwhile, New Frontier Media on Tuesday said it issued indemnity agreements with each member of the company’s board of directors and executive officers — Melissa Hubbard, Michael Weiner, Alan Isaacman, David Nicholas, Hiram J. Woo, Walter Timoshenko, Grant Williams, Scott Piper and Marc Callipari.

"Pursuant to the indemnity agreement, the company agrees ... to indemnify each of them in connection with actions, suits, inquiries, interviews, investigations, arbitrations or other proceedings arising out of such person’s service as an officer, director and or agent of the company, subject to the terms, conditions and limitations contained in the indemnity agreement," the company said in a regulatory filing.  

While it hasn't yet been served with a complaint, the company said it has been informed of a class-action suit on behalf of New Frontier Media’s public shareholders, against the company and its board of directors. 

"The complaint alleges that the individual members of the board of directors have breached their fiduciary duties owed to the company’s shareholders in connection with the previously disclosed, unsolicited, conditional proposal the company recently received from Longkloof Ltd. to acquire for cash all of the outstanding shares of the company’s common stock not already beneficially owned by Longkloof for $1.35 per share," the company said.

The complaint seeks, among other things, seeks to enjoin the directors to exercise their fiduciary duties to obtain a transaction that is in "the best interests of company’s shareholders, a declaration that the directors have violated their fiduciary duties, an order directing the company and its directors to account to the class for any damages sustained because of the alleged wrongs."

The complaint also seeks an award to the lead plaintiff in the uncertified class suit, as well as attorneys fees.

New Frontier Media, in a statement, said the charges are baseless, but it did not discount similar complaints coming forth.

"It is possible that additional, similar complaints may be filed in the future," the company said.