Battle for New Frontier Media Takes Another Turn
LONDON — The battle for control of New Frontier Media took another turn this week as Longkloof Ltd. filed counterclaims against the adult transactional TV company.
In late May, New Frontier Media sued South Africa-based Longkloof and its officials over violating U.S. Securities Exchange Act rules for not properly reporting their identity and activities as a "group." The suit seeks an injunction blocking the takeover.
Longkloof, which has been identified as a division of London-based Hosken Consolidated Investments, announced last week that it made counterclaims against New Frontier Media's management because its board has breached fiduciary duties in denying Longkloof's nomination of a slate of four directors and in stonewalling Longkloof's previously announced offer to acquire the company.
Longkloof's latest bid of $1.75 a share for shares it doesn't already own tops a competing bid by Manwin, which has offered $1.50 a share.
Channel Islands-based Longkloof, whose bid would value New Frontier Media at about $28.3 million, is New Frontier Media's largest shareholder at 15.9 percent.
"The counterclaims allege, among other things, that the board is seeking to entrench itself and to continue to pay themselves extravagant directors' fees," Longkloof officials said in a statement. "To preserve their annuity, the board is resisting any offer to acquire the company even on generous terms. The effort to deny shareholders the opportunity to vote for a competing slate (that would more open-mindedly consider all acquisition proposals) is simply a continuation of the board's efforts to entrench themselves in office."
Longkloof since its initial bid to buy out the company has been increasing its effort to get control of the company by proposing to nominate its slate of four candidates.
"Rather than give shareholders the opportunity to vote on any of the value enhancing alternatives that Longkloof has put before them, the board frivolously sued Longkloof," Longkloof officials said. "They apparently decided that an expensive 'scorched earth' litigation strategy, using shareholder money and reducing the value of the company, to protect their jobs was their best defense to our full and fair offer and our slate of four highly qualified nominees for election to the board at the 2012 annual meeting of shareholders."
New Frontier Media CFO Grant Williams did not immediately respond for XBIZ comment on Longkloof's counterclaims.
Boulder, Colo.-based New Frontier Media offers the Penthouse TV premium channel and pay-per-view services packaged as The Erotic Networks, or TEN, that include Xtsy, Juicy and VaVoom.