Shares of Martha Stewart Living Omnimedia Inc. slumped as much as 14 percent Monday after Sequential Brands Group Inc. made an offer to buy the home-decor company for $6.15 a share, below its closing price on Friday.
Investors had anticipated a higher price. Through Friday, the shares had jumped 37 percent over two days amid reports of an imminent takeover by Sequential Brands, owner of the Avia workout gear and Caribbean Joe island wear brands. That's adding to a year-to-date gain that was already the strongest for Martha Stewart Living since 2009.
The shares fell 86 cents, or 12 percent, to close Monday at $6.02, after falling to $5.97 for the biggest intraday decline since August 2011.
The deal -- valued at about $353 million based on shares outstanding as of March 31 -- will be paid 50 percent in stock and 50 percent in cash, Sequential said Monday in a statement.
Martha Stewart, who with her daughter Alexis controls the voting rights, will serve as chief creative officer of the brand and take a seat on the board, according to the statement.
In a statement released Monday, Stewart called the deal a "transformational merger."
"The Sequential team is smart, hardworking, and understands the power and limitless opportunity of the Martha Stewart brand and its formidable design, editorial and marketing teams," she said.
The offer price may lead to shareholder resistance, said Erik Gordon, clinical assistant professor at the the University of Michigan's Ross School of Business. After suffering through the worst of times with the company -- including Martha Stewart's time in prison in 2004, slumping advertising sales and TV show cancellations -- shareholders expected more from the turnaround efforts under Chief Executive Officer Daniel Dienst.
"It's a fizzle-out end for what was once a consumer empire," Gordon said in an email. "Martha was a good entrepreneur who was blind to her weak spots that cost her and her shareholders dearly."
Stewart Living Omnimedia Inc. was also beset by the same challenges facing the entire media industry as her fans went online to get their tips on cooking and decorating. Publishing had been the mainstay of her empire, but it has been replaced by merchandising.
The Martha Stewart Living brand reaches about 100 million consumers monthly and has a retail presence in stores such as Macy's, Home Depot and Staples.
Under the deal, Sequential will also get the Emeril Lagasse brand, which includes food and cookware products and television and book properties.
Sequential Brands' shares were mostly unchanged. The company has a financing commitment from GSO Capital Partners LP, an affiliate of the Blackstone Group, according to the statement. Sequential Brands was advised by Tengram Capital Partners. Martha Stewart Living was advised by Moelis & Company.
The deal is expected to close in the second half of 2015.
Information for this article was contributed by Brooke Sutherland of Bloomberg News and Anne D'Innocenzio of The Associated Press.
Business on 06/23/2015