KeyBanc’s Poor Fairness Opinion In Max & Ermas Restaurants’ Buyout

June 24, 2008

Max & Erma'sLast week’s announcement that Max & Ermas Restaurants (MAXE) had a rough second quarter, with the weak economy and the March blizzard hurting top and bottom lines, made us wonder whether we should expect yet another busted buyout. After all, bad quarterly results have triggered quite a few merger cancellations, for the most part unjustifiedly. However, when we saw KeyBanc’s (KEY) deplorable fairness opinion we were convinced that the buyer is getting such a good deal that there is a lot of room for deteriorating performance before the deal will be called off. Read the rest of this entry »


Restoration Hardware Class Action Payout Still Leaves Shareholders Short Of Full Value

June 18, 2008

Restoration Hardware Logo

Shareholders of Restoration Hardware (RSTO) are the beneficiaries of a class action lawsuit against the buyout that saw the firm go to the low private equity backed bid rather than the higher bid from Eddie Lampert’s Sears Holdings (SHLD). Shareholders will receive an extra $0.19 per share from the litigation in addition to the $4.50 merger consideration. After legal fees, total payout should be roughly $4.63, a 2.9% increase over the price negotiated by the board. Nothing to make you rich, but a lot more than the annual dividend yield of the S&P index. The extra payout explains why Restoration Hardware trades currently a few cents above the $4.50 merger consideration.

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American Capital Strategies Pulls Out Of Merisel Buyout

June 10, 2008

Merisel logo

Another addition to the graveyard of busted mergers: business development company American Capital Strategies (ACAS) has terminated its agreement to buy Merisel (MSEL) under the “material adverse change” clause that has become a standard excuse for buyer’s remorse. After the exchang of multiple letters between the two firms, Merisel stock reacted predictably with a steep drop and now has a market capitalization below its net cash, despite generating positive earnings and cash flow in 2007. Read the rest of this entry »


Watchguard Private Equity Antitrust Litigation: The Sequel

May 19, 2008

Watchguard BuyoutThe dismissal of the anti-trust litigation against Watchguard and private equity funds Vector Capital and Francisco Partners got all the headlines (here, here, here) a couple of months ago, but a recently filed amendment to the lawsuit over directors’ breach of fiduciary duty makes much more fascinating reading than the somewhat dry anti-trust case. It is also likely to be another milestone in the unraveling of the private equity bubble, because it illustrates to what lengths some managers were able to go to do buyouts on their terms and not in the best interest of shareholders. Read the rest of this entry »


Insider Trading In Busted Buyout Of Trans World Entertainment?

May 13, 2008

Trans World EntertainmentOne of the risks of investing in small caps is lack of liquidity, and shareholders of Trans World Media Entertainment (TWMC), operator of f.y.e. (For Your Entertainment) stores, were reminded of how illiquid their stock is when CEO Robert J. Higgins withdrew his proposal to acquire the firm. The stock fell not only after the announcement, but was down already some 10% during the day just prior to the press release. Some shareholders seem to have known the news before it was published.

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Beware Of Litigious State-Owned Banks

February 29, 2008

Large financial institutions tend to be reluctant to get involved in lawsuits, even when it would benefit their clients or shareholders. German state-owned banks are a notable exception to the rule.

Michael L GordonJohn AngeloFormer shareholders of National Home Health Care Corp, which was acquired by Angelo Gordon last year, Read the rest of this entry »


SCPIE Merger Should Get A Higher Hostile Bid

February 19, 2008

SCPIE logoHedge fund activist Joseph Stilwell has been so busy trying to block the acquisition of SCPIE Holdings (ticker: SKP) by privately held The Doctors Company that he lost sight of the forest amid the trees. Investors don’t get an answer to the obvious question of why no higher bid has been made, even though Stilwell insists that a higher bid was available. The reason: the potential buyers all signed standstill agreements that prevent them from making acquisition proposals without the board’s approval. Read the rest of this entry »


Buyout Of American Community Properties Trust As Slow As That Of Wilshire Enterprises

February 12, 2008

American Community Properties TrustShareholders of American Community Properties Trust (ticker: APO) are eerily reminded of the stalled sale of Wilshire Enterprises (ticker: WOC). Chairman and CEO Michael Wilson proposed a going-private transaction in July, and it has dragged on for half a year without any visible progress. Read the rest of this entry »


Image Entertainment Is Yet Another Busted Buyout

January 28, 2008

Image Entertainment Is Yet Another Busted BuyoutThe collapse of Image Entertainment’s (ticker: DISK) buyout by David Bergstein sent its stock down 43% to a 5-year low on Friday. It now trades at less than half the $4 that Lions Gate Entertainment (ticker: LGF) was willing to pay before being outbid by Bergstein. The exact cause for the collapse of the transaction is a mystery to us, because financing, the usual culprit in the current M&A market, was much more solid than in most private-equity backed deals that have failed recently. At the current level, Image Entertainment trades at a fraction of the price that Lions Gate was willing to pay, and we believe that it remains an attractive acquisition target for a consolidator, in particular in light of its rapidly growing Egami digital distribution platform. Read the rest of this entry »


Chaparral Resources Shareholders Have Last Laugh As Lukoil Settles Litigation

January 22, 2008

LukoilOverseasRussian oil giant Lukoil’s (ticker: LUKOY) buyout of the minority shareholders of Chaparral Resources, Inc. has been marred by allegations of serious wrongdoing and fraud that came to light during discovery in shareholder litigation, which we wrote about in September 2006. More than one year later, Lukoil has agreed to settle the litigation by paying over $36 million to the former shareholders of Chaparral Resources. Read the rest of this entry »


How Low Can Wilshire Enterprises Go?

January 14, 2008

Wilshire Enterprises 3-year returnWhile the process of selling Wilshire Enterprises (ticker: WOC) continues to drag on into its seventh month after the announcement that “initial bids are in,” WOC’s shares have fallen to a level where they trade almost at the level of cash on WOC’s book. We have pointed previously to the disastrous record of its management team, and the current trading levels are only increasing our enthusiasm for the deep value opportunity in WOC.

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Wilshire Enterprises: Waiting For Godot

November 25, 2007

Wilshire EnterprisesInvestors in Wilshire Enterprises (Ticker: WOC) had to suffer through another painful quarter of losses. While commercial real estate markets remain strong, apartment rents continue to increase in most markets and the largest ever buyout of a multifamily REIT, Tishman Speyer’s and Lehman Brothers’ purchase of Archstone-Smith, closed in early October, Wilshire’s losses continue to depress its stock price. In the meantime, shareholders are waiting for a buyout that just doesn’t seem to happen, despite the announcement, with great fanfare, that “Initial Bids Are In” a good five months ago.

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