Martha Stewart Living Omnimedia Inc. slumped as much as 14 percent 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 declined to $6.02 at 10:35 a.m. New York time, 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.
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 cancelations -- 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 e-mail. “Martha was a good entrepreneur who was blind to her weak spots that cost her and her shareholders dearly.”
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.