Red Oak will not support Audible's deal with Amazon.com

By Lisa Kerner

Charlotte, N.C., March 7 - Audible Inc. shareholder Red Oak Partners, LLC opposes Amazon.com, Inc.'s proposed $300 million acquisition of Audible.

In a March 6 letter to both companies, Red Oak said the $11.50-per-share offer price is unfair and accused Audible's board of ignoring "important factors" in agreeing to the deal.

Specifically, Red Oak cited Allen & Co.'s "flawed" analysis of price premiums with an "overhang" of stock that pushed the price down 20%.

Red Oak also disagreed with Amazon.com's list of comparable companies, which included Netflix, Blue Nile, RealNetworks, 1-800-Flowers.com, drugstore.com and Overstock.com.

"We are confused as to how sites which sell diamonds, flowers, drugs, and excess inventory correlate to a site which offers a digital audiobook download subscription service - they are entirely different markets and businesses," Red Oak's letter said.

The 1.4% shareholder went on to question Allen & Co.'s $2.62 million fee in light of the pre-existing relationship between Audible and Amazon.com.

Red Oak believes that the $10 million break-up fee plus up to $3.5 million in expenses included in the agreement does not provide any incentive "to shop the deal elsewhere."

"In what is becoming a 'war' over end consumers, we believe that Audible is a small yet important piece in a comprehensive consumer product offering, and therefore strategic value should be priced into any acquisition," the letter stated.

"We do not believe any such value was priced into this deal," Red Oak added.

David Sandberg, Red Oak's portfolio manager, said Red Oak will not tender its shares in the offer. In addition, Red Oak may participate in the stockholder litigation already filed in order to have the plaintiffs "justify the price of the currently proposed settlement."

Audible specializes in digital audio editions of books, newspapers, magazines, television programs, radio programs and original programming. The Newark-based company offers over 80,000 programs through its web sites, which include Audible.com.

Amazon.com is a Seattle-based internet retailer.

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