LOS ANGELES--(BUSINESS WIRE)--Oaktree Capital Management, L.P. (“Oaktree”) today announced that certain funds and accounts that it manages (“Oaktree Funds”) have made a proposal to acquire all outstanding shares of JAKKS Pacific, Inc. (NASDAQ: JAKK) (“JAKKS” or “the Company”) common stock for $20.00 per share in cash, representing a total equity value of approximately $670 million on a fully diluted basis. The offer represents a 25% premium over the Company’s closing stock price as of September 13, the 30-day average closing price of the Company’s stock leading up to September 13, and the average closing price of the Company’s stock over the preceding 24 months.
The Oaktree Funds are making the proposal public after the JAKKS Board’s continued refusal to engage in meaningful discussions about the options available for maximizing shareholder value at JAKKS, including an acquisition by the Oaktree Funds. The Oaktree Funds are among JAKKS’ largest shareholders, with a current collective stake of approximately 4.9% of JAKKS common shares.
Below is the text of the most recent letter Oaktree sent to JAKKS’ Board of Directors outlining its proposal:
| September 13, 2011 |
| The Board of Directors of JAKKS Pacific, Inc. |
| 22619 Pacific Coast Highway |
| Malibu, CA 90265 |
| Attention: Stephen G. Berman and Murray L. Skala |
Gentlemen:
We are disappointed that you have repeatedly declined to pursue meaningful discussions with us about the options available for maximizing shareholder value at JAKKS Pacific, Inc. (“JAKKS” or “the Company”), including a potential going-private transaction. Collectively, Oaktree-managed funds (“Oaktree Funds”) are among the Company’s largest shareholders, with a stake of approximately 4.9% of outstanding common shares, and we are strong believers in the potential for long-term value creation at JAKKS. As such, it has been our preference to discuss with you available options to enhance shareholder value, including a potential negotiated going-private transaction. We have attempted to engage with you on that basis since March of this year, but you have repeatedly rebuffed our efforts. Given the significant ownership interest that the Oaktree Funds have in JAKKS, we are left with no acceptable alternative but to make it known publicly that we are prepared to acquire, through the Oaktree Funds, all of the Company’s outstanding common shares for $20.00 per share in cash. We also believe it is important for fellow shareholders to know that our funds are willing to increase the price of this offer if the Company can demonstrate to us further value over the course of our due diligence process.
Since the time of our initial discussions in March, macro-economic conditions have deteriorated significantly, and the Company’s prospects have not improved. As a result, we strongly believe that JAKKS shareholders would welcome the certainty of a significant all-cash premium for their shares.
Our funds have acquired a 4.9% position in JAKKS because we believe that the shares are undervalued. We would like to engage in a dialogue with you about options available to enhance shareholder value, including a conversation about a potential going private transaction at $20.00 per share.
A going-private transaction at $20.00 per share delivers fair and compelling value to JAKKS shareholders and represents a 25% premium over the Company’s closing stock price as of September 13, the 30-day average closing price of the Company’s stock leading up to September 13, and the average closing price of the Company’s stock over the preceding 24 months. Importantly, in view of the Company’s substantial cash position, which by our calculation amounts to approximately $7.38 per share, on a fully diluted basis, our proposal on a cash-adjusted basis represents a premium of 46% over the Company’s cash-adjusted closing stock price as of September 13. The Oaktree Funds’ proposal creates immediate liquidity for JAKKS shareholders, an opportunity not otherwise available to them in the highly illiquid trading market for the Company’s stock.
As we indicated in March, the Oaktree Funds are prepared to commit substantial capital resources to the Company, in the form of both debt and equity to help fund future acquisitions, new licenses and an aggressive organic growth strategy. We continue to believe that the Company, its licensors and its employees would benefit greatly in the long run from private ownership of JAKKS, which would enable the Company to execute a long-term value creation strategy free from the pressures of managing short-term objectives and seasonality.
This transaction is of the highest priority for us and has the full attention of our investment team and legal advisors at Kirkland & Ellis LLP. We are ready to proceed immediately and, with the Company’s full cooperation, we believe we can complete our due diligence, have firm committed financing and execute definitive documentation within 60 days. The Oaktree Funds have long-standing relationships with lenders who have substantial experience in the Company’s industry. We are highly confident in our ability to raise the necessary debt financing for the transaction.
While we remain hopeful that we can reach an agreement that benefits all JAKKS shareholders, we are committed to maximizing the value of our investment and, consequently, are prepared to take our offer directly to JAKKS shareholders should the need arise.
We look forward to hearing from you.
Sincerely,
| Oaktree Capital Management, L.P. |
| As Investment Manager to certain funds and accounts |
| By: ________________________ | By: ________________________________ | ||
| Name: B. James Ford | Name: Matthew Wilson | ||
| Title: Managing Director | Title: Managing Director | ||
About Oaktree Capital Management, L.P.
Oaktree is a leading global investment management firm focused on alternative markets, with $80 billion in assets under management as of June 30, 2011. The firm emphasizes an opportunistic, value-oriented and risk-controlled approach to investments in distressed debt, corporate debt (including high yield debt and senior loans), control investing, convertible securities, real estate and listed equities. Oaktree was founded in 1995 by a group of principals who have worked together since the mid-1980s. Headquartered in Los Angeles, the firm has over 600 employees and offices in 13 cities worldwide.
Additional Information
This communication does not constitute an offer to buy or solicitation of an offer to sell any securities. No tender offer for the shares of JAKKS Pacific, Inc. (“JAKKS”) has commenced at this time.
This communication does not constitute a solicitation of consents and shall not be deemed a solicitation of consents with respect to any securities of JAKKS.
In connection with any tender offer or consent solicitation, certain funds and accounts managed by Oaktree Capital Management, L.P. (“Oaktree Funds”) will file relevant materials, which may include a tender offer statement, and a definitive consent solicitation statement and/or other documents, with the SEC. ALL INVESTORS AND SECURITY HOLDERS OF JAKKS ARE URGED TO READ ANY SUCH DOCUMENTS FILED WITH THE SEC BY THE OAKTREE FUNDS CAREFULLY AND IN THEIR ENTIRETY, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT ANY SUCH TRANSACTION. Investors and security holders will be able to obtain free copies of documents filed with the SEC by the Oaktree Funds (when they become available) at the web site maintained by the SEC at www.sec.gov.