Forbes minority shareholders would be paid first in sale

The minority shareholders of Forbes Media would be paid first if the company is sold, reports Dan Primack of Fortune.

Primack writes, “Back in 2006, a private equity firm called Elevation Partners — whose partners include rock star Bono and former Apple exec Fred Anderson — acquired a minority stake in Forbes’ digital operations (the online and offline operations were merged in 2009). No financial terms were disclosed, but Fortune has learned that the total investment was $264 million. Moreover, the deal was structured as preferred stock, meaning that Elevation would get paid back first in the event of a sale (and then share in any gains).

“That provision is paramount today, given the asking price. If Forbes sells for $400 million, then minority shareholder Elevation would receive a majority of the proceeds. Not too shabby, particularly given that Elevation had written its Forbes investment down by more than 75%.

“For Elevation, this would be its second major save. The firm previously looked to have made a massive mistake by investing $460 million into mobile device maker Palm, but used a sophisticated structure — plus an unexpectedly generous buyout from Hewlett-Packard — to eek out around a $25 million profit. It also has experienced large gains via smaller investments in both Facebook and Yelp.”

Read more here.