EDCI Holdings, Inc. Announces Initial Dissolution Distribution Payment Amount and Date
15 Enero 2010 - 3:24PM
PR Newswire (US)
NEW YORK, Jan. 15 /PRNewswire-FirstCall/ -- EDCI Holdings, Inc.
(NASDAQ: EDCI) ("the Company" or "EDCI"), today announced the
following developments. EDCI Plan of Dissolution. On January 14,
2010, EDCI's Board of Directors met to determine the timing and
method for the initial distribution of proceeds to its shareholders
in accordance with the previously approved Plan of Dissolution. At
that meeting, the Board of Directors determined to revise the
aggregate proceeds for the initial dissolution distribution and
contemplated tender offer slightly higher to a new total of $31
million. Of this new total, the Company's Board of Directors
approved an initial dissolution distribution payment of $21
million, or approximately $3.12 per share of EDCI's common stock.
The Company's Board of Directors has fixed January 20, 2010, as the
record date for determining stockholders entitled to participate in
the initial dissolution distribution. The initial dissolution
distribution will be paid on February 1, 2010 and the Company's
common stock will trade ex-dissolution distribution commencing on
February 2, 2010. As previously announced, the Company's Board of
Directors has been considering using a portion of the proceeds
available for the initial distribution to effect a tender offer.
Such an approach would afford additional flexibility to
stockholders who prefer a fixed amount of cash and immediate
recognition of any tax-losses to so elect, for a portion of their
shares. The Company's Board of Directors determined that such a
tender should be initiated in an amount of up to $10 million. The
total of up to $10 million would be reduced pro rata if the result
of the tender would put EDCI's net operating losses at risk, as
EDCI believe it is prudent to continue to protect those tax-loss
carryforwards at this time. Any amount not successfully tendered
would be subsequently distributed as a dissolution distribution
payment. However, the Board of Directors deemed it advisable to
delay the contemplated tender offer related to EDCI's common stock
given that EDCI's majority owned subsidiary Entertainment
Distribution Company, LLC ("EDC") is currently in discussions with
a potential buyer of its Entertainment Distribution Company GmbH
("EDC GmbH") subsidiary and certain related assets and entities
(the "German EDC Business"). The Company is not able to predict
with any certainty the outcome of those discussions at this time
and notes that the consummation of such transaction is subject to
many risks and uncertainties and EDC can provide no assurances that
such a transaction will be consummated on the terms currently
contemplated or at all. In particular the cooperation of Universal
Music Group ("UMG"), EDC's largest customer, is critical to any
transaction, and EDC cannot provide any assurance UMG will so
cooperate. The Company believes a sale of the German EDC Business
on the terms currently being discussed would represent the best
outcome for all of EDC's constituencies, including its unionized
workforce of approximately 700 employees and UMG. EDCI believes the
new owner plans to invest in and grow the German EDC Business by
expanding its distribution capabilities. EDCI does not intend to
update stockholders on this matter until a time at which a more
certain outcome exists. UMG's Opposition to EDC's Blackburn -
Hannover Consolidation. As previously disclosed, on July 23, 2009,
Universal International Music B.V. ("UIM"), an affiliate of UMG,
provided notice of its claim that EDC was in anticipatory breach of
the Manufacturing and Related Services Agreement between EDC and
UIM dated May 31st, 2005, as amended (the "Manufacturing
Agreement") by taking steps to close EDC's Blackburn facility and
service UIM's remaining UK requirements from Hannover. As a result,
UIM claimed that EDC forfeited its right to continue to service
100% of UIM's UK manufacturing requirements, and UIM was entitled
to sub-contract the entirety of such volume to a UK-located third
party of its choice, although UIM indicated it would not enforce
that remedy but reserved the right to do so. EDC strongly rejected
UIM's assertions and subsequently referred the matter to
arbitration seeking: (i) a declaration that there is no breach by
EDC of the Manufacturing Agreement as a result of the Blackburn -
Hannover Consolidation and (ii) damages for the losses incurred by
EDC as a direct result of the July 23, 2009 letter and the
continued breaches by UIM of the implied covenant of good faith and
fair dealing. In subsequent correspondence related to the
arbitration of this matter, UIM indicated that it would begin to
order 40% of its UK manufacturing requirements from third party
manufacturers in 2010, while maintaining its claim that EDC had
forfeited its right to continue to service 100% of those UK
requirements. UIM also advanced additional theories under which
EDC's closure of the Blackburn facility and the manufacture of
UIM's UK volume out of EDC's Hannover facility would constitute a
breach of the Manufacturing Agreement - including that EDC would be
unable to meet its contractual service level obligations ("SLAs")
for UIM UK requirements manufactured out of Hannover - and UIM has
further indicated that in arbitration it will argue EDC's actions
constitute a material breach of the Manufacturing Agreement
entitling UIM to terminate the entire Manufacturing Agreement. EDC
responded that these additional theories also lacked merit, that
EDC could satisfy the SLAs and warned UIM of the legal consequences
of breaching the Manufacturing Agreement by procuring 40% of its UK
requirements from third parties. However, on January 14, EDC
confirmed that UIM had begun to order certain of its UK
requirements from third parties. In consultation with counsel, EDC
continues to believe UIM's claims and remedies lack merit and
intends to continue to vigorously defend and pursue this matter in
arbitration. In particular, the Manufacturing Agreement expressly
provides that EDC is only obliged to use its "commercially
reasonable endeavors" to manufacture the majority of UIM's UK
requirements at its Blackburn facility, and as previously disclosed
in March 2009, at that time management of EDC determined and EDC's
Board of Directors confirmed that it was no longer commercially
reasonable to continue operating the Blackburn manufacturing
facility. Further, EDC believes it can meet all SLAs for UIM's UK
requirements manufactured from its Hannover facility. However, if
UIM were successful in its claims in arbitration EDC would face
material and adverse consequences. The loss of 40% of UIM's UK
requirements, based on the high fixed cost nature of EDC's
manufacturing operations, would have a material adverse effect on
its profitability. If UIM were to prevail in its new argument that
EDC's breach provides UIM with the right to terminate the entire
Manufacturing Agreement and UIM so elected, EDC would lose
substantially all of its contractually committed manufacturing
business. EDC expects that UIM's entire contractually committed
manufacturing volume will represent approximately 75% of EDC's
total manufacturing volume in 2010, that the UK requirements
account for approximately 20% of EDC's total manufacturing volume,
and thus 40% of the UK requirements account for approximately 8% of
EDC's total manufacturing volume. As UIM has now breached its
obligations to EDC with regard to certain of its UK requirements,
EDC believes it is likely that UIM will continue that breach by
procuring up to 40% of its UK requirements from third parties. EDC
will seek to recover those losses, other losses and punitive
damages from UIM in arbitration. However, UIM's actions will also
force EDC to evaluate other cost-reduction measures in Hannover to
mitigate those damages.. About EDCI Holdings, Inc. EDCI Holdings,
Inc. (NASDAQ:EDCI) is a multi-national company, headquartered in
New York, that is seeking to enhance shareholder value by pursuing
acquisition opportunities. EDCI is the holding company of
Entertainment Distribution Company, Inc., which is the majority
shareholder of Entertainment Distribution Company, LLC ("EDC"), a
European provider of supply chain services to the optical disc
market. EDC serves every aspect of the manufacturing and
distribution process and is one of the largest providers in the
industry. EDC's clients include some of the world's best-known
music, movies and gaming companies. EDC's operations include
manufacturing and distribution facilities in Hannover, Germany. For
more information, please visit http://www.edcih.com/. Cautionary
Statement About Forward Looking Statements This press release
contains forward-looking statements within the meaning of the U.S.
Private Securities Litigation Reform Act of 1995 that involve risks
and uncertainties concerning EDCI's proposed Plan of Dissolution.
Actual results may differ materially from the results predicted.
More information about these and other important factors that could
affect our business and financial results is included in the "Risk
Factors" section of our quarterly report on Form 10-Q we filed with
the Securities and Exchange Commission ("SEC") on October 30, 2009
and the proxy statement we filed with the SEC on November 16, 2009.
Web site: http://www.edcih.com/ DATASOURCE: EDCI Holdings, Inc.
CONTACT: Matthew K. Behrent, +1-646-201-9549 Web Site:
http://www.edcih.com/
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