Kroenke Sports & Entertainment, LLC Delivers Definitive Proposal to Outdoor Channel Holdings, Inc.

Offer to Acquire 100% of Outstanding Common Stock of Outdoor Channel at $8.75 per Share

DENVER--()--On March 6, 2013, Kroenke Sports & Entertainment, LLC (“KSE”) delivered a definitive proposal to the board of directors of Outdoor Channel Holdings, Inc. (“OUTD”) (Nasdaq: OUTD) to acquire, on the terms and conditions set forth in the proposal, all of the outstanding shares of common stock of OUTD, at a price of $8.75 per share in cash.

A copy of the letter from KSE to OUTD is included below:

March 6, 2013

Board of Directors
Outdoor Channel Holdings, Inc.
43455 Business Park Drive
Temecula, CA 92590
Attn:   Thomas E. Hornish
Perry T. Massie
Roger L. Werner, Jr.

Gentlemen:

We are pleased to submit this definitive proposal to acquire Outdoor Channel Holdings, Inc. (“OUTD”) for cash consideration that will provide your stockholders with substantially greater value and certainty than they would receive under your pending merger agreement with InterMedia Outdoors Holdings, Inc. (“InterMedia”).

We greatly appreciate the cooperation we have received in completing our confirmatory due diligence review following our letter to you of February 27, which has confirmed our admiration for OUTD and the accomplishments of your management team and employees. We are pleased to provide you with the definitive proposal in this letter.

Accordingly, we propose to acquire 100% of the outstanding shares of OUTD common stock in an all-cash transaction at a price of $8.75 per share, on the terms and subject to the conditions set forth in this letter and the attached agreements. Our transaction agreements track closely in all relevant respects your pending merger agreement with InterMedia, except for certain enhancements to the rights of OUTD and your stockholders described below. Our proposal is definitive and contains no financing or due diligence conditions. We are prepared to sign the merger agreement and voting support agreement in the forms attached to this letter, upon termination of the current agreements with InterMedia and confirmation that your Board has approved the transactions contemplated by our definitive proposal.

As has already been recognized by your Board of Directors and – as evidenced by the sharp increase in the OUTD stock price following our announcement – by your stockholders, our all-shares/all-cash proposal is clearly superior to the InterMedia transaction in several respects:

  • It represents a premium of 9.4% over the cash price of $8.00 per share that the OUTD stockholders may elect under the InterMedia merger agreement, subject to the cap on cash consideration contained in that merger agreement.
  • It represents a premium of 16.7% over the OUTD closing stock price on February 27 of $7.50 per share, which price fully reflects the market’s valuation of the InterMedia hybrid cash/stock merger consideration.
  • Our proposal is materially more favorable financially than the blended value of the InterMedia merger consideration, as shown in the analysis of the fairness opinion of Lazard Fréres & Co. LLC contained in your proxy statement.
  • Our offer provides clear, immediate value for all OUTD stockholders, without capping the amount of cash that your stockholders may receive and without forcing your stockholders to retain a stub minority equity security of uncertain value in a controlled company (in which your unaffiliated public stockholders would own less than 21% of the total equity).
  • We will deliver high certainty of closing, as our proposal is not subject to any financing contingency, nor any buyer optionality in the form of a reverse break-up fee (in contrast to the InterMedia transaction).
  • The merger agreement we are attaching to this letter in executable form is more favorable to your stockholders than the InterMedia merger agreement, in several important respects:

    • As noted above, our proposal is not subject to a financing contingency and does not limit your recovery against us to a reverse break-up fee in the event we fail to finance the transaction – as you know, we are a financially strong company and have the necessary resources to consummate this transaction expeditiously.
    • Unlike InterMedia, which claims a $6.5 million break-up fee if your Board accepts a superior proposal, we have reduced the break-up fee to $1 million, which represents less than 0.50% of the equity value (well below what is typical or permissible under Delaware law in transactions of this nature). This modest reimbursement ensures that your stockholders will receive the highest available value.
    • Our agreement does not include contractual limitations on your right to seek monetary damages for our willful breach (unlike the InterMedia merger agreement, which essentially gives InterMedia an option to decide whether to complete its transaction or simply walk away and pay a modest termination fee).
    • Finally, our proposed voting agreement respects your Board’s fiduciary responsibilities and does not seek to commit your large stockholders to vote for a transaction that your Board no longer supports.

    The InterMedia transaction, by contrast, is subject to numerous infirmities with negative consequences for OUTD and your stockholders, including that:

    • It is a partial cash bid, largely financed by OUTD’s own balance sheet (therefore your stockholders are effectively providing liquidity to InterMedia’s owners for their currently illiquid assets, a risk that we do not believe the OUTD stockholders are being fairly compensated to undertake).
    • It constitutes a change of control of OUTD without providing full compensation to your stockholders for such sale of control (instead providing your stockholders with equity of highly speculative value, which the market to date has not embraced).
    • It allows InterMedia to preserve transaction optionality in several ways, as noted above, with resulting uncertainty for your stockholders.
    • Even if the InterMedia transaction closes, the value proposition of that combination is entirely speculative and has been assessed by the market at around $7.50 per share, significantly lower than our $8.75 per share offer (despite the presence of full disclosure of the InterMedia business, assets and financial condition in the proxy/registration statement).

In addition to providing superior valuation and superior contractual certainty for OUTD, our proposal can be completed on a prompt and expeditious basis. We believe the transaction can be completed as early as two months from signing, and are prepared to commit all appropriate resources to working with you to provide a proxy statement to your stockholders and to obtain approval under the HSR Act and the FCC rules, none of which raise any substantive concerns.

In short, our offer constitutes a Superior Proposal for OUTD and your stockholders (as such term is defined in the current merger agreement between InterMedia and OUTD), and we are fully committed to seeing this combination of our two companies to completion.

In light of your stockholder meeting on March 13, 2013 to consider the InterMedia merger agreement, it is imperative that we take action immediately to ensure that your stockholders can take advantage of the value represented by our proposal. Accordingly, our offer will remain open until 5:00 p.m. (New York time) on Wednesday, March 13, 2013.

This letter itself does not create any legally binding obligation, liability or commitment by us concerning a proposed transaction, and there will be no legally binding agreement between us unless and until we enter into a definitive merger agreement.

We are very pleased to be able to offer this Superior Proposal to your stockholders. We are confident that our proposal presents a compelling opportunity for both our companies and look forward to your positive response. If you have any questions or would like to clarify any aspect of our proposal, please do not hesitate to call either Paul Gould at Allen & Company, at (212) 339-2283, or Andrew Nussbaum at Wachtell, Lipton, Rosen & Katz, at (212) 403-1269.

Sincerely,

Kroenke Sports & Entertainment, LLC

By: /s/ James A. Martin

Name:     James A. Martin
Title: President and Chief Executive Officer

About KSE

Denver-based Kroenke Sports & Entertainment is one of the world's leading ownership, entertainment and management groups. As owners and operators of Pepsi Center, the Paramount Theatre, Dick's Sporting Goods Park, the Colorado Avalanche (NHL), Denver Nuggets (NBA), Colorado Mammoth (NLL) and Colorado Rapids (MLS), KSE's sports and entertainment assets are second to none. Additional properties under KSE's umbrella include Altitude Sports & Entertainment, a 24-hour regional television network; Altitude Authentics, the company's official retail provider; and TicketHorse, the official ticketing provider for KSE teams and venues.

Contacts

Kroenke Sports & Entertainment, LLC
T. Collins, Vice President, Communications
303-405-1352
tcollins@pepsicenter.com

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Contacts

Kroenke Sports & Entertainment, LLC
T. Collins, Vice President, Communications
303-405-1352
tcollins@pepsicenter.com