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Sillerman Makes Buyout Bid For CXK - Update

June 04, 2007 | Other
CKX Inc., the publicly listed operator of Elvis Presley's Graceland estate, confirmed Thursday that it has received a buyout offer from its chairman and chief executive, Robert F.X. Sillerman, that values the company at $1.33 billion.

Sillerman, the company's single largest shareholder, said he and Simon Fuller, the chief executive of CKX subsidiary 19 Entertainment Ltd., would purchase the company's outstanding common stock for $13.75 per share in cash.

CKX's board has been actively considering the proposal and plans to have another meeting early Friday morning to consider the bid. CKX said it expects the special committee of independent directors to complete its review of the transaction and present its recommendation to the board at the meeting.

CKX shares rose 4 cents to $10.63 Thursday, then climbed to $13.37 in after-hours trading.

CKX owns and develops entertainment content, including licensing the name and likeness of such figures as Elvis Presley and Muhammad Ali. It also has the rights to the "American Idol" television show and adaptations that air in more than 100 countries.

Additional background information:

His death prompted a media frenzy, caused widespread hysteria and triggered countless conspiracy theories. But the demise of Elvis Presley on August 17, 1977 at the age of 42 also laid the foundations for an extraordinary financial windfall for his widow Priscilla and their daughter Lisa Marie.

In death, “The King”, who was born in Tupelo, Mississippi, to an impoverished truck driver and a sewing machine operator, began outearning his living self in 1988.

The music legend, who made his name with hits such as Hound Dog, Love Me Tender and Heartbreak Hotel and appeared in numerous movies, was until last year the world’s highest-earning dead celebrity.

The Elvis Presley brand earns $42 million (£21 million) in revenues each year, second only to Kurt Cobain, the lead singer of Nirvana, who raked in $50 million from sales of records and memorabilia last year.

The business of Elvis Presley is today thought to be worth about $600 million; a considerable fortune compared with the $4.9 million value placed on the estate at the time of his death.

Despite selling a billion albums during his lifetime, Elvis suffered from poor business deals and extravagant spending habits, compounded by indifferent financial advice.

The singer owned five lavish residences as well as four aircraft, and he frequently gave away cars and untold sums of money.

The sale of the 700 master recordings he made during his career to RCA for a mere $5.4 million in 1973 is said to be among the most shortsighted deals in the history of the music business. After agents’ costs, the sale netted Elvis just $1.5 million.

CKX, which holds 85 per cent of the Elvis Presley estate, with Lisa Marie in control of the remaining 15 per cent, is expecting to reap further gains from the brand with an Elvis-themed Las Vegas attraction in the pipeline.

The company already benefits from sales of records, which rocketed after the musician’s death, as well as memorabilia, and visits by diehard fans to his home, Graceland, in Memphis.

After the death of Elvis, Priscilla took charge of the effort to save the Elvis Presley estate by turning Graceland into a tourist attraction and creating Elvis Presley Enterprises. Her efforts have paid off, and today Lisa Marie is estimated to be worth about $300 million.

Priscilla remains a director of CKX and acts as a consultant to the brand to maintain public interest in Elvis and continuously upgrade the attractions.

Update June 4, 2007: Board OKs private time for CKX

NEW YORK -- CKX Inc. chairman and CEO Robert "F.X." Sillerman and "American Idol" creator Simon Fuller are set to take private CKX after its board approved a $1.3 billion, or $13.75-per-share, cash buyout and related transactions.

Friday's board move boosted shares of the company that owns the rights to such cultural icons as Elvis Presley, Muhammad Ali, David Beckham and "Idol" to a 52-week high. The stock closed the session up 37.8% at $14.65.

In addition to the buyout, for every share of CKX, shareholders will receive one share of Sillerman-affiliated real estate firm FX Luxury Realty, in which CKX on Friday acquired 50% for $100 million in cash and which will look to develop attractions based on Presley and Ali in Las Vegas, Memphis and cities around the world under a newly struck licensing arrangement.

Sillerman said in an interview Friday that the deal also will free up the new company, 19X, to do deals with content creators and cultural icons who in the past wouldn't sign arrangements because of the disclosure requirements of public companies.

Sillerman said Friday that the deals are designed to create a new public company that can pursue capital-intense real estate projects while also allowing shareholders to get a cash payout and a chance to stay invested in the real estate firm.

While most observers expect the transaction to go through, there is a 45-day window for alternative bids, CKX said.

The cash portion of the buyout price represents a 29% premium over CKX's Thursday closing price of $10.63. Sillerman and Fuller, who is a CKX director and the CEO of its 19 Entertainment Ltd. unit that owns "Idol," said they would fund the deal through a combination of equity and debt financing, with the two executives and unnamed other senior company managers "providing a substantial portion of the equity commitment."

"After two successful years of developing and exploiting the assets we have acquired, during which time we have seen tremendous year-over-year growth, we have come to realize that there is a substantial opportunity to capitalize on the Elvis Presley and Muhammad Ali assets in real estate and location-based attractions," Sillerman said.

However, he said that "the pursuit of these opportunities would require a significant investment of capital, which could hinder our ability to grow the core area of our business and which is not consistent with the business plan."

He hopes for a "flurry of activity" in terms of deals with content creators/icons who in the past opted out of deal talks at the last second as the publicly traded CKX would have had to "disclose more of their lives ad finances" than they wanted.

Sillerman said in the interview that master plans for a development in Memphis -- including three hotels and an entertainment complex with an amphitheater -- already have been submitted.

FX Luxury owns land in Las Vegas and plans to pursue an Elvis Presley hotel and casino project along with commercial and residential developments. And talks are under way with about a dozen other locations around the world, Sillerman added.

Fuller said he is "looking forward so much to continuing to work with Bob building the amazing assets that we have in 'Idol,' Elvis Presley, Muhammad Ali and the Beckhams."
Ruthie wrote on June 01, 2007
This is indeed scary! Something else for us to worry about. How greedy can one be (I know the answer to that question)!
Brian Quinn wrote on June 01, 2007
This is wonderful news. The Elvis Legacy can now go from strength to strength. EPE did not have the capital or vision to move into the 21st Century. The best result of all would be for CKX to buy out Elvis' back catalogue from Sony BMG.
Paul Reno wrote on June 02, 2007
This can only be a positive move in the right direction. Hopefully we will finally get the 'Elvis On Tour' and 'That's The Way It Is' footage. It's been on the bootleg curcuit for too long. DVD and HD are what we want. Elvis In Concert needs remastering and releasing. Unofficially unavailable, but I am sick of watching the bootlegs and would like to see his last special re-edited and remastered.
Viva wrote on June 02, 2007
I can't see what difference this will make to Elvis. What the hell has Sillerman done that's so wonderful anyway? A national impersonator contest? Well, excuse me if I don't start waving the CKX flag and break out with a rousing version of the Star Spangled Banner, but if anyone thinks that's a positive move then you really do need your head testing. Oh, and let's not forget those life-changing ducks. Wow, the've really done Elvis proud.
Steve V wrote on June 02, 2007
I still cant believe Parker sold those 700 masters for 5.4 mil in 1973. For a guy that was supposed to be business savvy, that was the dumbest move in show business history. Surely Elvis must have felt his catalog was worth a lot more than that. I guess the divorce preoccupied his mind.
get real wrote on June 02, 2007
Please,help me out here someone. So, does the $40 millio-ish that Elvis earns a year NOT include a single penny from his recording previous to 1973? I have always wondered about that. This seems like the perfect time to ask. Does anyone know for sure??
jeremytcb wrote on June 03, 2007
That is correct. The estate gets no money for songs recorded prior to the '73 deal. That is why RCA/BMG uses as few songs as possible from '74-'77 on their compilations. On the 70's section of any set they bring out, they load it up with the songs they own and then throw in a Moody Blue or Way Down to make it look decent.
JerryNodak wrote on June 03, 2007
Don't worry. Sillerman didn't get to be a very rich man by being stupid. He ain't gonna kill the Golden goose.
Viva wrote on June 03, 2007
In my opinion, I'm afraid that the golden goose already has his head on the chopping block.
Steve B. wrote on June 03, 2007
I don't have negative feeling about Sillerman's involvement. The man certainly knows how to generate a dollar and a profit.
Paul Reno wrote on June 05, 2007
Robert F.X. Sillerman is a business man, with an understanding of the 'product'. I'm not interested in 'the product' but love Elvis and his music. If he is willing to develop the 'product' then it's a win-win situation. Parker screwed up big style in 1973 - imagine selling off an artists lifetime work - which included some of his most valuable performances? I think Elvis had a wonderful voice from 1973 onward, so BMG/SONY and Graceland can have deals and release anything post 1973 and I'll be very happy. In fact, Moody Blue is my favourite song - so all the takes will be great for me on one CD!
Getlow wrote on June 05, 2007
I agree the decision to sell all pre 1973 recordings was tragic but we need to put the 73’ deal in perspective 5.4 million was a lot of money in 1973 and I don’t blame Colonel entirely as Elvis had to agree, they both thought it was a great deal at the time, they were making good money on the road, more recordings would be made and neither I’m sure knew that Elvis would die in 4 years. Don’t to mention the monies required for Cilla. Elvis himself thought he was getting money for doing nothing. Remember also, this was before a time where it’s common for artists to have financial advice and protection. It just simply wouldn’t happen in this day and age. As for Sillerman / EPE, we ‘lost’ influence as fans a long time ago, this is why for many of us this years visit to Memphis will probably be the last, it’s simply not the same anymore but things have to move toward the next generation so in that sense I agree with Brian.
MickeyN wrote on June 05, 2007
Does anyone know if Sillerman is a real "fan" of Elvis or just a businessman cashing in? Whereas there will still be some good in Elvis being marketed with business motivation, it's not the same as being promoted by the enthusiasm of fans. For me this was demonstrated a couple of years ago when the number one singles were reissued in UK. They all did well (some reached no 1 again all the others made top ten) but the "powers that be" (EPE, Warner Bros etc) would not release any video footage to UK TV for some petty copyright reason. With the footage I am sure that the singles would have made a massive impact - a great opportunity missed. Surely the greater good of promoting Elvis should have overcome the protectionist policies of EPE (all they were protecting were their profits and NOT Elvis' reputation). That, to me, showed the difference between fans and business vultures.
SuziB wrote on June 05, 2007
Getlow. Wrong on all counts. It wasn't a lot of money at all - and I doubt Elvis 'agreed' - merely a case of Parker exploiting a man who wasn't exactly in control of himself or his destiny. A few years ago in the legal wrangle between Parker's, EPE and RCA, the judge deemed RCA and Parker guily of fraud, malpractice and exploitation in the catalogue rights sale.
Steve V wrote on June 05, 2007
SuziB is right. When all was said & done I think Elvis barely got 1 million dollars out of the deal for his end. For an artist of his caliber that was nothing, even back in 1973. But he is to blame for this poor decision as much as Parker & prob Vernon. You think Sinatra or McCartney would have done this for their work? Elvis was a bad businessman.
suzie wrote on June 06, 2007
yes, Mr.S. is a brilliant an money-wise but is he really in touch with "Elvis People ". the news write-up needs a proof reader. ELVIS left us Aug. 16 ,not 17th/ 1977. Elvis left NO widow. they were divorced. she is his only ex-wife & Mother of his only child. Our fan club prays for Elvis to e remembered for his talent, not ?? money.
Getlow wrote on June 06, 2007
Unfortunatley SuziB you've missed my point and the fact you suggest that you doubt Elvis actually agreed tells me you little about this subject. Jerry Schilling among others state that Elvis was quite enthusiastic about it as he felt he was getting money for nothing and was telling everyone about this great deal Colonel had got him. Tragic as the whole thing was Elvis agreed to it after deciding not to seek any advise which of course was his mistake ...... June Elvis was neither a good or bad business man, he just almost always took the easy option.
Ruthie wrote on June 07, 2007
Sillerman & Colonel would make a great pair except that Sillerman is very smart & Colonel knew how to win through intimidation. It was the Colonel who stated: I don't get 50% of what Elvis makes, he gets 50% of what I make". Sillerman is doing practically the same thing only in different times under different circumstances. He is no more an Elvis fan than my dog. He will practically make Elvis a household word but it's the true fans who will pay the price. He is going to run this whole business in the ground. It is already out of hand. Graceland operations used to be based on fan relations, now you are lucky to get anyone there interested in your questions, opinions or suggestions. The effect of Sillerman's company began almost immediately & why others couldn't see it, I'll never figure since I am not the sharpest tack in the box. They have practically raped the fans this year with the prices for the 30th anniversary celebrations & it's only going to get worse. They have taken over every independent shop where you could at least get a decent selection & not offered any items in return that you can't get through bootleg. And people bootleg because everything from Graceland is overpriced. I will never stop loving Elvis & his music & the great legacy he left but the whole idea of Graceland & what Elvis stood for is gone.
JerryNodak wrote on June 10, 2007
Nobody knows for certain what's going to happen. Probably not even Sillerman at this point. It's all just speculation. If I've learned one thing in life it's not to worry about things you can't control. So, I won't.