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.
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
SOURCE Dolphin Limited Partnership III, L.P.