UPDATED, 6:30 PM: RealD issued a statement tonight about the acquisition offer from Starboard Value: “RealD’s Board of Directors, in consultation with its advisors, will carefully review and consider the unsolicited, non-binding indication of interest from Starboard. RealD is always open to constructive discussions about opportunities to increase stockholder value. The Company will continue to take actions it believes are in the best interest of all RealD stockholders.”
PREVIOUSLY, 2:55 PM: Shares in the 3D technology company are up about 20% in post market trading after Jeffrey Smith’s activist hedge fund said it has bought 9.9% of RealD’s shares and offered to buy the company. Starboard Value would pay $12 a share, a 29% premium over today’s closing price. Starboard says in an SEC filing that it told CEO Michael Lewis in a letter that the fund doesn’t think RealD “is best positioned to execute against its future opportunities as a public company.” What’s more, the company may “suffer given the challenged release schedule for 3D films.” It could do better as a private company, ans would have “immediate liquidity and an opportunity for shareholders to maximize the current value of their investment with significantly less risk than the Issuer’s standalone plan.” Starboard added that it would take on debt “at conservative market-level terms” for the transaction.
RealD has been struggling as enthusiasm for 3D flagged both for movies and in TV. Last month B. Riley analyst Eric Wold urged management to look for “major cuts – especially with increased involvement from activists and growing unrest from investors with the continued [consumer electronics] initiative spend and lack of any visible results.” Venues with RealD’s 3D technology generated $278M in box office sales in August, with a little more than half of the total from domestic theaters. That fell short of analyst expectations; for example, Stifel’s Benjamin Mogil anticipated $293M.
Several RealD executives have left over the last year as it lost the sense of itself as a growth company, which it had when it went public in 2010. Morgan Stanley’s Ryan Fiftal noted in July that theaters would have nine 3D films in Q3, down from 13 in the period last year, and that attendance at 3D films likely would be flat. RealD’s ambitions to bring 3D to TV sets took a big hit in late 2011 when Samsung decided not to make LCD screens for the technology.