Post by
iwasgold on Apr 18, 2014 6:15pm
Going private
Doing the math it is clear that insiders control a fraction over 50 % of the shares. They can do whatever they want, voting-wise.
It makes sense to take the company private, clear up any debt and share situations, then sit back and collect the cash flow or possibly go public again down the road. Borrowing money is so cheap these days that you'd think there'd be a buyer somewhere, and the cost savings in structure would be helpful.
The funny thing is why they announced a strategic review when they could have simply tabled their own offer and gone to a vote. The shares were at 14 cents, so they could have offered, say, 20 cents and easily got enough votes to seal the deal. Instead now it is trading at 25 cents and up. This to me suggests the insiders do not plan to buy it themselves. A move by the Blairs or Scarafile does not seem likely.
A private equity firm is not going to be interested unless they have synergy with another of their operations. There's also Fairfax maybe? They like this kind of situation. I also wonder if any public firms might go for it, eg Colabor Group. There is also Sysco who could scoop it up without any effort at all. It is just too small and specialized a company and with too much competition to attract much interest.
I hope that the share price finds support over 30 cents, so that a transaction would have to be done in the high 30's. Usually these deals are based on a percentage of the previous 20-30 day market average, which is still pretty low. We need a sustained hold above 30 to guarantee a decent price.
If anything happens it will be by the end of the second quarter, probably. If nothing happens there was no interest in buying and it is back to business as usual.
I don't know what will happen with the preferreds. The structure is not clear to me. I really hope a deal can be done without having to go to court. SInce this likely means a premium for the preferred holders, ie their interest owed, the price for the common will suffer possibly.