Image, Nyx merger on the rocks

Digital company failed to deliver required funds

By Susanne Ault -- Video Business, 1/30/2009

JAN. 30 | Image Entertainment has declared Nyx Acquisitions in breach of the two companies’ proposed merger agreement, the latest in a string of disappointments for the DVD supplier in its long hunt to be acquired.

Nyx, an affiliate of Q-Black and Joe Bretz, has failed to deliver a required $1.3 million to a trust account by a Jan. 20 deadline, as dictated in the original merger proposal, according to Image management. The money was going toward a $1.8 million business interruption fee, which Image would receive upon the merger not closing.

Under the agreement, struck in November, Nyx had agreed to purchase outstanding shares of Image stock for $2.75 a share.

On Thursday, Image formally notified Nyx that its noncompliance constituted a breach of the merger agreement.

Image’s board of directors is considering terminating the merger agreement or litigation to recover the $1.8 million business interruption fee.

Last year, Image similarly declared BTP Acquisition Co. in breach of contract over their proposed merger. That agreement eventually collapsed.

“The Image board of directors has determined that it is in the best interests of the company and its stockholders to formally notify Nyx that it is in breach of the merger agreement for its failure to deliver the second deposit of $1.3 million,” said an Image spokesman. “We are very disappointed that Nyx has not complied with its obligation under the merger agreement and what this failure reflects regarding Nyx’s current ability to close the transaction. If Nyx immediately delivers $1.3 million in immediately available funds and can reconfirm to our complete satisfaction that it has the ability to finance the transaction, then Nyx will no longer be considered in breach of the merger agreement and, subject to approval of Image’s stockholders at the upcoming special meeting of stockholders, the company stands ready to close. If not, we have no choice but to exercise our rights under the merger agreement, seek collection of the $1.8 million business interruption fee and pursue all other available remedies. We remain committed to enhancing stockholder value.”