The 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 »
Russian 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 »
While 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.
Investors 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.
After struggling for several weeks to get shareholders to vote in favor of a buyout by Integra LifeSciences (ticker IART), orthobiologics company IsoTis (ticker: ISOT) conceded partial defeat last Friday by postponing its meeting for 10 days to solicit additional votes. The trouble at IsoTis started in February this year when the FDA put approval of IsoTis’ Accell products on hold.
Genesco’s (ticker: GCO) poor second quarter results triggered a panicked reaction from Finish Line (ticker: FINL), which is “evaluating its options regarding” the merger of the two firms. Predictably, in the current jittery market, nervous investors sold off the stock temporarily to a record spread of almost 25% below the purchase price. A detailed analysis of the situation shows that Finish Line stands little chance of either getting out of the agreement or re-negotiating a lower price as long as Genesco’s management remains committed to seeking the highest price.
Finish Line emerged as the winner of a bidding war with Foot Locker over Genesco, trumping Foot Locker’s highest bid by $3.50. Read the rest of this entry »
W Holdings (ticker WHI) market cap took a half billion dollar bath after its loan to Inyx (ticker IYXI) turned out to have been a classic lending debacle, where good money is thrown after bad. Its Puerto Rican subsidiary Westernbank is the biggest lender to Inyx, and recently filed for receivership of Inyx’s U.K. unit, which is equivalent to a chapter 11 in the U.S. Inyx responded by placing its U.S. businesses into chapter 11, sending its stock to penny levels.
Inyx got started when the wife of Armenian-Canadian businessman and Inyx CEO Dr. Jack Kachkar acquired a public shell company with the intention of Read the rest of this entry »
“For 40 days, the Topps board could shop like Paris Hilton.” Vice Chancellor Leo Strine, Delaware Chancery Court, on Topps’ go-shop provision (prior to Hilton’s incarceration)
Michael Eisner’s attempted Mickey Mouse buyout of playing card and Bazooka bubble maker Topps (ticker: TOPP) has been relegated to the history channel after a Delaware court enjoined the deal and allowed Upper Deck to launch a tender offer for Topps’ shares at a premium to Eisner’s proposed price. Topps’ management frustrated all attempts by Upper Deck to buy Topps in a classic example of a principal-agent conflict, where management prefers a financial buyer over the purchase by a competitor in order to keep their jobs, although shareholders would get a bigger payout from a strategic buyer.
CCA Industries (ticker: CAW) reported earnings of only $0.18/share after recognizing about $0.06/share in expenses relating to the botched buyout by Dubilier & Co. Dubilier was unable to arrange financing for the buyout, and CCA Industries was left holding the bag in the form of $405,000 in expenses in the first quarter alone. In hindsight, it becomes clear why Dubilier executed a letter of intent rather than a definitive agreement, which may have included a reverse break-up fee.
An unexpected result of the end of the buyout is the appointment of Seth Hamot to the board. Read the rest of this entry »
Steve Mihaylo is a little late in the game with his proxy fight opposing Inter-Tel’s (ticker: INTL) sale to Canadian telecom software firm Mitel Networks for $25.60/shares. The meeting to approve the sale is scheduled to take place this Friday, June 29th, but Mihaylo’s final proxy statement was filed with the SEC only on Tuesday. It is highly unlikely that he will be able to mail the proxy statement to shareholders before the meeting. Inter-Tel has a head start, because most shareholders will not even receive Mihaylo’s voting card until after the meeting.
Steve Mihaylo created Inter-Tel in 1969 as a division of another telecom, took it public in 1981, and retired in early 2006 as CEO and director. He still owns some $125 million worth of INTL stock today. Inter-Tel manufactures voice and data network equipment for small to mid-size businesses.
In a rare display of boardroom competence and courage, Transaction Network Services (TNS) announced today that it will recapitalize the firm by taking on $240 million in extra debt and paying shareholders a $4/share dividend, which is a hefty 25% at the current share price. Recapitalizations like this one are a standard tool of private equity firms, who pay themselves hefty dividends after taking a company private, and then flip the firm loaded with extra debt to risk-seeking buyers. It is refreshing to see that boards are questioning the value added by private equity firms in such transactions and are beginning to do these deal themselves in order to benefit their shareholders.
Netsmart’s (NTST) buyout has become a little less likely to go through after a decision by Delaware’s Chancery Court last week that instructs shareholders to seek damages and appraisal rights due to serious shortcomings in the sales process. The buyers, private equity firms Insight Venture Partners and Bessemer Venture Partners, are unlikely to risk protracted litigation, which is almost a given. Netsmart’s stock is likely to appreciate significantly as investors have now seen management’s internal projections forecasting a 50% increase in EBITDA by 2009 (for 2006, EBITDA grew 68% despite $1.6 million in buyout-related costs, and sales increased 55%, partly due to an acquisition).