New Frontier sues group making takeover bid

BOULDER — The battle over Boulder-based adult entertainment distributor New Frontier Media Inc. — a fight that already spans three continents — now is heading to a federal court in Denver.

New Frontier on May 31 announced it filed a lawsuit alleging violations of federal securities laws against a group of investors attempting a hostile takeover of the company.

New Frontier’s suit, filed in the Colorado district of the U.S District Court, alleges companies and individuals associated with South African-based holding company Hosken Consolidated Investments Ltd. (HCI) are illegally attempting to gain control of New Frontier’s board of directors through a proxy contest. The lawsuit alleges those board members then will force New Frontier to accept a takeover bid unfavorable to investors.

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The filing is the latest twist in a takeover battle that involves one of the giants of the online pornography industry and a subsidiary of one of South Africa’s leading broadcasters.

Longkloof Ltd., a subsidiary of HCI based in the United Kingdom’s Channel Islands, announced in March it was launching a takeover bid of New Frontier Media. Longkloof owns 15.9 percent of New Frontier Media (NasdaqGS: NOOF), and initially bid $1.35 per share for the rest of the company. In late May, Longkloof upped its offer to $1.75 per share, which brings the bid to about $28.3 million.

HCI describes itself as “a black-empowerment investment holding company” on its website, and is headquartered in Johannesburg. It holds a stake in a large South African television network, as well as mining, gambling and industrial companies.

Longkloof has a rival suitor in Manwin Holding SARL, a Luxembourg-based holding company that operates Playboy TV and owns websites such as YouPorn and PornHub. Manwin in March announced it wanted to buy Longkloof for $1.50 per outstanding share.

Representatives of New Frontier, Hosken and Manwin did not respond to requests for comment.

According to press releases issued in the past three months, New Frontier is reviewing the takeover bids with assistance from outside legal and financial advisers.

The lawsuit charges that Hosken, Longkloof, two associated companies and six individuals are essentially attempting an end run around the board’s discussions.

The parties allegedly are attempting to stack New Frontier’s board in an attempt to force it to accept Longkloof’s bid, according to a press release issued Thursday, May 31, by New Frontier.

The group “has chosen to launch a costly, disruptive and distracting proxy contest to place four of (its) hand-picked candidates on New Frontier Media’s six-member board in an apparent attempt to obtain control of the company,” according to the release.

In addition to Hosken and Longkloof, New Frontier’s lawsuit names Hosken executive chairman Marcel Golding, Mile End Limited, Sabido Investments, Adam Rothstein, Eric Doctorow, Mahomed Khalik Ismail Sheriff, Willem Deon Nel and Barbara Wall. South African media reports identify the last four as media executives linked to Hosken.