Dolphin III Seeks Sizable Special Dividend and Strategic Alternatives

Rhea-AI Summary

Dolphin Limited Partnership III, L.P. has requested A. H. Belo Corporation's board to consider strategic alternatives, including a going-private transaction. They propose a special dividend of $1.06 per share, totaling $22.8 million, and highlight concerns regarding AHC’s recurring cash operating expenses of $184 million and a projected $8 million cash decline for 2020. Despite valuable assets, Dolphin III argues that AHC should pursue deeper cost reductions and cease acquisitions to enhance profitability.

Positive

• Proposed special dividend of $1.06 per share, totaling $22.8 million.
• Significant cash and assets total approximately $77 million or $3.60 per share.

Negative

• FY 2019 recurring cash operating expenses of $184 million.
• Projected $8 million cash decline for 2020, indicating financial strain.
• No analyst coverage and no recent share buyback program renewal.

GREENWICH, Conn., Aug. 13, 2020 /PRNewswire/ -- Dolphin Limited Partnership III, L.P. ("Dolphin III") and other entities, long-term holders with approximately 4.9% of the Series A Common Stock of A. H. Belo Corporation (NYSE Ticker Symbol: AHC), announced today that a May 2020 letter was sent to both Robert W. Decherd, Chairman, President and CEO, and John A. Beckert, lead independent director, with request to forward to the entire board.

Dolphin III's recent correspondence, notwithstanding AHC's valuable franchise assets and approximate 9% pro forma annual dividend yield, noted: (i) with an approximate $1.70 share price, $36 million market capitalization and no analyst coverage, it believes it is no longer logical to remain public, (ii) FY 2019 recurring cash operating expense appears to have been approximately $184 million, (iii) there was approximately $77 million or $3.60/share of 2019 FYE ($71 million or $3.30/share as of June 30, 2020) cash, assets convertible to cash, investments and tax recovery and no debt, (iv) in April, AHC advised of an expected 2020 $8.0 million cash decline (before a $2.3 million tax recovery), (v) while AHC had generally managed years of secular revenue declines with corresponding expense reductions, AHC should implement deeper cuts to achieve attractive and consistent profitability, (vi) adjusting for approximately $3.6 million of non-recurring expense, FY 2019 EBITDA appears flat, (vii) FYE 2019 tangible book value, adjusted for lease accounting, was approximately $2.75/share, (viii) AHC, at cost, has hundreds of millions of fully depreciated assets requiring valuation, and (ix) AHC had made significant strides with its frozen defined benefit plans.

Therefore, it remains Dolphin III's view that AHC should (i) pursue strategic alternatives, including a going private transaction (possibly with an ESOP), (ii) pursue deeper expense cuts to achieve consistent attractive profitability, (iii) discontinue acquisitions based upon recent sizable goodwill writedowns and (iv) pay stockholders a $1.06 per share ($22.8 million in the aggregate) special dividend with realization of secured notes receivable expected June 2021.

Dolphin also noted that in 2018, AHC reincorporated to Texas from Delaware and, like Delaware (but unlike some states), the fiduciary obligation of a director of a Texas corporation, is solely to its shareholders. Accordingly, Dolphin III expressed concern for AHC, under its corporate opportunity, not having acquired the available nearly 1.0 million shares of Series A and Series B Common Stock (representing approximately 7.1 million votes) from affiliates and insiders including its former CEO and a director and deny voting control. During 2019-2020 and, as recently as February 2020, approximately 1.0 million shares of Series A and B Common Stock were purchased by Mr. Decherd at $4.00 and $5.00 per share, respectively, while AHC's active 2.2 million share repurchase program covering both Series was not renewed upon its Q4 2019 expiration.

Dolphin III outlined and concluded that it believed a strategic transaction would generate value above the prices paid, including recently, by Mr. Decherd reflected in the above paragraph and had offered support for such, including public merger transactions at attractive valuations.

While AHC was asked to comment as to any factual inaccuracies in Dolphin III's recent letter, AHC offered no corrections in its reply letter.

About Dolphin:

Dolphin Limited Partnership III, L.P. and other Dolphin Partnerships have a history of working constructively to generate value on behalf of all shareholders. Dolphin was initiated in or about 1995.

Contact: Margaret Bae, Esq.
Olshan Frome Wolosky LLP  
(212) 451-2300

View original content:http://www.prnewswire.com/news-releases/dolphin-iii-seeks-sizable-special-dividend-and-strategic-alternatives-301111865.html

SOURCE Dolphin Limited Partnership III, L.P.

FAQ

What is the special dividend amount proposed by AHC?

Dolphin III proposed a special dividend of $1.06 per share.

When is the expected payment date for the special dividend?

The realization of secured notes receivable is expected in June 2021.

What are AHC's projected cash declines for 2020?

AHC anticipates an $8 million cash decline for 2020.

How much are AHC's recurring cash operating expenses?

AHC's recurring cash operating expenses were approximately $184 million in FY 2019.

What strategic alternatives does Dolphin III suggest for AHC?

Dolphin III suggests pursuing a going-private transaction and deeper expense cuts.