Investment Group Makes Offer for Franklin Electronic Publishers

By Jim Milliot -- Publishers Weekly, 6/2/2009 5:07:00 AM

An investment group consisting of existing management and shareholders has offered to buy Franklin Electronic Publishers for $2.35 per share, putting the value of the deal at just over $19 million. Franklin, which has licensing agreements with a number of publishers, was one of the first companies to marry print with technology, developing handheld devices that contain reference materials sold through dedicated players such as the Spelling Ace.

Franklin’s product line also includes language translation products, and the company was a pioneer in creating an e-book player--the Bookman--but dropped the device because of poor sales. Despite selling more than 41 million e-books, Franklin has lagged behind in the digital market and in recent months has cut jobs, frozen salaries and consolidated operations. For the nine month period ended December 31, revenue was down 17%, to $38 million, and it had a small net loss of $663,000. In the last full fiscal year, Franklin had sales of $60.6 million and earnings of $2.5 million.

The buyout group, called Saunders Acquisition Corp., is headed by Franklin president Barry Lipsky. In its proposal, Saunders said the offer provides shareholders the opportunity to cash in their shares at a “significant premium to current market value.” For much of 2009, Franklin’s stock has been trading at below $1 per share, although on Friday, the day before the offer was made public, the stock was selling at $1. The deal will require the approval of the board and shareholders, and a committee is expected to be formed to review the fairness of the proposal.