The shareholder meeting of Wilshire Enterprises (WOC) has been adjourned for the second time. This is actually the third delay of the shareholder meeting, which was originally scheduled for February 26 in Wilshire’s preliminary proxy materials. The meeting was then set for March 24th and at the last moment adjourned to March 30th. Today, the meeting was adjourned again to April 20th.
Needless to say, we were at first a little nervous about the adjournment. The trick is that because the meeting had been scheduled, it had to be opened and immediately adjourned by a vote of the shareholders. So we were nervous that some other business potentially could be transacted in our absence (we didn’t bother trekking to Delaware just to observe an adjournment). Fortunately, the only business conducted was the adjournment.
The adjournment was only possible through a vote of the majority of shareholders. So in addition to the votes controlled by management, other shareholders had to support the adjournment, too. We understand that Full Value Partners/Bulldog voted their shares in support of the adjournment. Which raises the question of why Bulldog would support an adjournment. Normally, shareholder meeting are procrastinated when management needs extra time to solicit votes in its support. If this were the case with this Wilshire meeting, Bulldog obviously would not have supported the adjournment. We do not know exactly what happened behind the scenes, but the circumstances suggest that something important is brewing.
We doubt that Bulldog cut a deal with management for some board representation, as someone who called us suggested. This contentious election will have an all-or-nothing outcome: either Bulldog gains two seats, or management does. Neither side has a motive to compromise if it can win.
Similarly, we cannot see Bulldog agreeing to adjourn the shareholder meeting to allow management to solicit additional votes in its favor. If Bulldog supports the adjournment, the most likely scenario is an event that makes the fight over control of Wilshire moot. The only event we can think of is a sale of the company. If Bulldog wins two seats at the current meeting, they will win another two at the next one in August, and Sherry Wilzig will lose control. A sale would give the current CEO Sherry Wilzig Izak a face-saving way out.
Last year, a similar chain of events unfolded when Nick Jekogian’s NWJ made its ill-fated attempt to acquire Wilshire for a bargain-basement $3.88/share. Wilshire first amended its 10-K filing with information that would normally be included in the proxy statement, because the special meeting to approve the acquisition was likely to be held after the deadline for the annual meeting, and there was no point in having two meetings in a single year. Of course, management did not reveal that it was working on a sale when it amended its 10-K. This left us to speculate about its real intentions.
We feel that we are now going through a similar scenario. Management is, of course, tight-lipped, and so is Bulldog. We just hope that management will find a more serious buyer than the last one. How about a buyer who actually has the money to pay for Wilshire? We would advocate a sale of the assets rather than a sale of the entire firm, if only because real estate is a local business, especially for a small firm like Wilshire, and buyers for multifamily properties tend to be local operators. They are familiar with acquiring properties in their local area and have no expertise in dealing with a publicly traded company with properties in four States. We believe that a sale of the assets followed by a liquidation would achieve more value for shareholders than a sale of the entire company. Wilshire’s investment banker, FBR, has been chasing the wrong type of buyer. Inexplicably, the proxy during the NWJ acquisition shows that management had rejected a prospective buyer who wanted to buy the assets rather than the whole company, so we suspect that shareholders will not get maximum proceeds this time, either.
Disclosure: Thomas Kirchner manages the Pennsylvania Avenue Event-Driven Fund (PAEDX), which owns shares of Wilshire Enterprises and has submitted a proposal to abolish the poison pill. He is the author of an e-book about alternative strategies as well as the forthcoming book Merger Arbitrage: How to Profit from Event-Driven Arbitrage (Wiley Finance, 2009).
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