Greif & Co. served as financial advisor to management, assisting them in “cleaning-up” Simon’s balance sheet so that it could become a SPAC―a special purpose acquisition company.  SPACs enable stock market investors to participate in private equity-type transactions.  SPACs are shell or blank-check companies that have no operations but raise capital with the intention of merging with or acquiring operating companies.

In order to set the appropriate exchange rate for the preferred-for-common stock swap by Overseas, Greif & Co. had to determine Simon’s fair market value.  This task was complicated by the fact that Simon had a multi-faceted relationship with Yucaipa, Overseas’ parent, including an investment in Yucaipa AEC Associates, LLC, which owned: (i) Source Interlink Companies, a marketing, publishing, merchandising and fulfillment company of entertainment products (DVDs, CDs, magazines and books); (ii) All Media Guide, LLC, a B2B services company that provides entertainment descriptive content and content management technology to support the physical and digital distribution of entertainment media; and (iii) Digital On-Demand, Inc., which develops and manages custom kiosk hardware and software for retail environments. In addition to valuing Simon and its interest in these privately-held companies, Greif & Co. also had to value Overseas illiquid, non-control preferred stock position in Simon.  Finally, Greif & Co. had to appraise the value of Simon’s considerable net operating loss carryforwards.  In essence, the master valuation was made up of a spider-web of component part valuations.

As Greif & Co.’s assignment was to render an opinion as to the fairness of Overseas’ proposed exchange offer from the standpoint of Simon’s shareholders, Greif & Co. was also in the position of having to negotiate the fairness of the terms offered by Yucaipa-controlled Overseas, as price was not the only object.  Greif & Co. passed on the terms of the recapitalization agreement that set forth certain minority shareholder protections, as the exchange ratio ultimately conveyed a controlling interest in Simon’s common stock to Overseas.  As amended, the transaction closed and Simon assumed new life as a well-capitalized SPAC without the dual complications of having multiple classes of stock or the burden of funding cash-draining dividends.