Blue Bird (BLBD) – Odd Lot Tender – $200 Upside

Current Price – $26

Merger Consideration – $28

Upside – 8% ($200 for odd lot holders)

Expiration Date – October 15th, 2018

Tender Filling

 

This is a straight forward odd-lot tender. Blue Bird is buying back $50m of common and preferred shares. Common shares will be cashed out at $28/shares. Overall this buyback represents 6.6% of outstanding and the offer is expected to be oversubscribed. Tenders from odd-lot holders will be accepted on priority basis and not subject to proration.

So buying 99 shares and tendering allows to pick $200 from the sidewalk (if tender happens on current terms).

This tender is subject to financing, which will be arranged as an amendment and additional commitments under existing credit agreement. Keeping in mind stable company performance, relatively low amounts of debt (around 2x ad.EBITDA), high interest coverage (2.78x). I think financing is just a formality and will be arranged in time.

62 COMMENTS

      1. Chaim Gewirtz

        Does IB no longer allow tendering from multiple accounts? What if the accounts are in different names?

        1. will morrissett

          You use to be able to tender from a taxable account and an IRA but no longer. Different names is not a problem, spouse, child, gimp-living-in-a-box in your basement are all fine.

  1. Thinley w

    Besides IB, are there any other brokers that do not charge a fee to tender shares?

  2. Steffan Sondermark

    The shares are easy to borrow. Anyone has experience in buying large amounts of shares just before the tender (and tendering) while shorting the same amount?

    The idea is that the offer is pro-rated so I will not get all shares accepted in the offer. After the cutoff date the share price is likely to drop, so the short position will protect me there.

    I do not have any experience in this, I do however assume that some of the short position will be called just before cutoff – but likely not all of it. Any thoughts or even better experiences?

  3. Michael Lax

    Tendering and shorting at the same time is a violation of SEC rules, you can see posts about this by searching on this site.

    1. leoc00

      Curious where you learned that tendering and shorting at the same time is a violation of SEC rules. I couldn’t find anything searching this site or google. The closest thing I got was something called “short tender”, but its not the same as tendering and shorting at the same time. Thanks!

  4. Joel Wittenberg

    From a Schulte Roth & Zabel seminar:

    Rule 14e-4: The Short Tender Rule
    A. Rule 14e-4 Generally
    1. Rule 14e-4 prohibits a person from tendering shares into a partial tender offer unless the person is “net long” both at the time of tender and at the end of the proration period of the tender offer. Under Rule 14e-4(a)(1) a person’s “net long position” is the excess, if any, of its “long position” over its “short position.”
    2. In adopting Rule 14e-4 (which at the time was Rule 10b-4; it was designated as Rule 14e-4 in 1990), Congress indicated that its intention was for each shareholder to receive equal treatment based upon the shareholder’s interest in the securities that are the subject of a tender offer. By short tendering or hedging their tender, market professionals reduce their proration risk while increasing the proration risk of all those who cannot short or engage in hedged tendering, because the short or hedged tendering often leads to over tendering (i.e., the same shares being tendered more than once). The SEC has observed that short and hedged tendering often requires access to borrowed shares, which market professionals have a clear advantage in obtaining access to.7
    B. Things to Note When Calculating a Person’s Long and Short Positions
    1. Rule 14e-4(a)(1)(i) defines a person’s long position to include the amount of subject securities that such person:
    (a) Or his agent has title to or would have title to but for having lent such securities; or
    7 See Release No. 34-26609 (March 8, 1989).
    25th Annual Private Investment Funds Seminar | 8 | © 2016 Schulte Roth & Zabel LLP
    (b) Has purchased, or has entered into an unconditional contract, binding on both parties thereto, to purchase but has not yet received; or
    (c) Has exercised a standardized call option for; or
    (d) Has converted, exchanged, or exercised an equivalent security for; or
    (e) Is entitled to receive upon conversion, exchange or exercise of an equivalent security.
    2. Rule 14e-4(a)(1)(ii) defines a person’s short position to include the amount of subject securities that such person:
    (a) Has sold, or has entered into an unconditional contract, binding on both parties thereto, to sell; or
    (b) Has borrowed; or
    (c) Has written a non-standardized call option, or granted any other right pursuant to which his shares may be tendered by another person; or
    (d) Is obligated to deliver upon exercise of a standardized call option sold on or after the date that a tender offer is first publicly announced or otherwise made known by the bidder to holders of the security to be acquired, if the exercise price of such option is lower than the highest tender offer price or stated amount of the consideration offered for the subject security. For the purpose of this paragraph, if one or more tender offers for the same security are ongoing on such date, the announcement date shall be that of the first announced offer.

  5. leoc00

    Thanks guys.

    Doesn’t seem like a fair rule if a special situation hedge funder can probably easily setup multiple trading entities, then short in one account, tender in another. Whereas it would be difficult for a retail investor to do it. Maybe hedge funds will have difficult setting up multiple entities.

    If that’s the case, you can really only short right after the cutoff date and hedge the next few days until the tendered shares are returned to your account.

  6. Jed

    From a 13D filing today:
    Item 4 of the Schedule 13D is hereby supplemented to include the following:

    On September 14, 2018, the Company announced a tender offer to purchase up to $50 million in aggregate value of shares of its (i) Common Stock at a price of $28.00 per share and (ii) 7.625% Series A Convertible Cumulative Preferred Stock at a price of $241.69 per share (the “Tender Offer”). The Reporting Persons intend to tender 100% of the shares of Common Stock beneficially owned by the Reporting Persons in the Tender Offer, subject to the terms of the Tender Offer established by the Company. The Reporting Persons reserve the right, however, to change its intentions with respect to tendering its shares of Common Stock, including if the Company modifies the terms of the Tender Offer.

    As of September 14, 2018, ASP BB Holdings LLC was the direct record owner of, and had the power to vote and to dispose or direct the disposition of, 12,000,000 shares of Common Stock, representing 44.38% of the issued and outstanding shares of Common Stock based on 27,035,887 shares of Common Stock issued and outstanding as of September 12, 2018

  7. Jim Rivest

    Now that the large 44% shareholder wants to tender, there is more risk the deal terms could be changed. It’s boilerplate language in every deal, but when a large shareholder wants to tender, he may not like the fact that odd looters are cutting in front with no proration.

    Icahn changed the terms in the Kerr McGee deal when everybody was emailing each other and it was on every blog about making an ‘easy’ $200. At the last minute, it was changed to NO odd lot preference because lots of small investors were planning on playing that one.

    When these get very popular, I suspect we will see real change with odd lot preferences, I’m surprised it’s lasted this long.

    1. dt

      Are you referring to Kerr-McGee tender in 2005?

      Although I agree with you that large shareholder could push for language change to eliminate odd-lots I do not recall any case of this being done recently. But obviously there can always be the first time…

      1. AV

        So far it’s uncommon to see deal terms changed while the offer has already started, although with reverse splits this has been happening more frequently (guess because it doesn’t just change how the money is distributed, but also the amount). That said, I do think there is a big trend going on in various tenders to remove odd lot clauses. This is one of the first few decent tenders of the year. Used to be wayyyy more action.

  8. Jim Rivest

    dt, I’ve already received 3 emails about the BLBD deal from folks who don’t normally know or care about these odd lot tenders. So yes, it does remind me of the Kerr-McGee tender years ago because that’s exactly what happened then. If I was a large 44% shareholder tendering and saw a potential wave of odd lotters cutting in front of the line, I’d have the odd lot provision language changed.

    The Seeking Alpha poster who posted on FTV and BLBD is on ego trip. He posted FTV later in the deal, but BLBD very early. I was going to respond on the thread, but I then thought better of it, the less press the better, as he doesn’t seem to grasp the main issue. The problem is one public thread of “making an easy $200″ begets another.

    If the deal goes through without any change, I will be very curious how the publicity affected the amount of odd lots submitted.

    This guy’s last post:

    “I want to thank everyone who has gotten to this point from the bottom of my heart. I just went into Microsoft BING to search for information on new corporate actions. I typed “stock tender offer” and clicked “News” to filter the results. Guess what? My name and Seeking Alpha article was at the very top of the search results! I was floored. So I tried Google and Ixquick as well. Same thing! Wow! Companies pay millions to be put at the top and I got it for free after only 2 SA articles. You better believe I am saving the screenshot on my computer and sending emails to my friends and family! This is a day I will remember for a LONG TIME.”

    1. dt

      Jim, I do not see a big difference between me publishing these deals on SSI and other authors publishing it on SA (or many other numerous places). Yes, much more people read Seeking Alpha, but the core threat is the same – sharing increases risk of odd lot elimination for specific case as well as reduces the profitability and likelihood of similar tenders in the future. I do not think sharing can be stopped – simply too many people on too many sites do that anyways.

      I expected odd lots to disappear much sooner as these were already quite widely publicized few years back, but they still pop up occasionally and sometimes in quite sizable amounts (e.g. $700 for FTV). And as long as they do I am happy to ride the wave. When these will stop (as already gradually happens), I am sure there will be other type of opportunities.

      Eventually, one of these tenders will be cancelled (or odd lot eliminated), many ‘free lunchers’ like me will get slightly burned and this will no longer be risk free money as the risk of proration/cancellation will always be present.

      So enjoy the free lunch while it lasts and move one to the next table when this one gets empty.

  9. Jim Rivest

    dt, I agree that sharing cannot be stopped, but I disagree that posting these deals on a private site is essentially the same as a public site. I’m happy to pay you for the info you provide, but I’m also very happy to see you NOT providing the same info on Seeking Alpha. I have no doubt, you’d have many thousands of SA followers in no time.

    Chris DeMuth has 24K SA followers and used to post the info to these followers in addition to an army of many more lurkers. I believe he single-handedly killed a couple of odd lot deals from serial tenderers. To his credit, he took the constructive criticism to heart and now only posts these deals on his paid website.

    I also think there is a difference between the RMT odd lots and these cash odd lots. The RMT deals are usually quite large, so the odd lots fall through the cracks and don’t draw much attention from the companies that could remove the odd lot provision I also know investors who passed on FTV because it was just ‘too complicated’. There are a lot of moving parts to those deals, unlike BLBD, where everybody understands buying 99 shares gets you ~$250 in CASH.

    I agree that his odd game will disappear in time, but I’d prefer not rushing it.

    1. work 22

      if the terms are changed to shut out the odd lots, and BLBD doesn’t work and loses money, it will be a rare miss and not a lot of money lost. The return stats behind playing these consistently are still very compelling.

  10. mpawder31

    Everyone, I just looked up the Seeking Alpha guy that Jim mentioned and it’s pretty obvious that he is posting for the sake of his delusional fame fantasies. I know our first impulse might be to message him and tell him to stop damaging everyone, but I’d actually encourage you all just to ignore him and not to respond at all to his articles. A vigilante like him who knowingly inflicts mass harm on others just in order to be famous is basically a financial terrorist (sorry if that sounds like hyperbole). What irrational agents like that want the most is to be noticed. So let’s just not feed his ego by noticing him – even if it’s just to tell him to stop it. It’s hard to sit helplessly and watch him do his damage, but any recognition at all would probably just encourage him to keep posting.

  11. Aidan

    Just wondering if anyone else has the election choice visible on IB? Still not there for me. Thanks

  12. Joe Hill

    Any theories on why the spread is getting wider? Opportunity for odd lot is now around $400

  13. Jed

    My guess is that the big stock price jump at announcement was an over-reaction knowing that at best, a large investor would only be able to sell 6% of shares at $28.

  14. Terence

    Stock back up to $25.10 this morning. So far, odd lot provision is still in. Wonder if chances of its elimination is low enough to take the risk?

  15. Jim Rivest

    Terence, I think it is worth the risk, as there is more upside than downside and I do give the odds of any change at being less than 50-50. I still have doubts though about this one going through without the odd lot provision being changed, but that is a very rare event. I hope they don’t change their mind, but this one is getting a lot of press. It was just submitted on VIC and making a few more rounds.

    If the BLBD deal goes through with the odd lot provision intact, I’ll be stunned if the large shareholder and management allow it again in any future tender. One of the SA write-ups estimated the number of odd-lot tenderers is usually in the range of 50-1000 people. I hope the company also believes that will be the case, but it will be WAY OFF!

  16. Terence

    Thank you for your insights, Jim. I agree, upside of $3 vs downside of less than $3, since the stock was trading around $23 before the tender news. Also, if the odd lot is eliminated BEFORE the tender deadline, it might be possible to get out with the price not dropping as much.

    And yes, publicity of odd lots is NOT good!

  17. Rick Sanchez

    even if it changes, you can withdraw your election and sell your 99 shares on the open market. Assuming they don’t cancel on the last day like 10/14, which would be shifty

  18. Rick Sanchez

    This Amendment No. 2 is filed to (i) waive the Financing Condition (as defined in the Offer to Purchase) set forth in the Offer and (ii) remove the “Odd Lot” priority with respect to proration in the event that the number of Shares validly tendered in the Offer exceeds the number of Shares sought to be acquired in the Offer.

  19. dt

    Well this had to happen sooner or later. Will be interesting to see how this affects any upcoming tenders…

  20. Random Deals

    For those who have purchased or tendered the 99 shares, what are you going to do?

    1. dt

      You can sell your shares now or participate in the tender, but you will be prorated like everyone else.

  21. Kevin Cox

    In the future wouldn’t it be smarter for the company to insert the odd lot provision at the last minute?

  22. Jim Rivest

    If I ran a company and wanted to get rid of small positions, I would backdate the odd lot provision. It would serve their purpose and stop opportunists like us getting involved late in the process.

    I’ve been involved in ‘going dark’ transactions, where they specifically stated who they were taking out and that excluded anyone buying the shares after the ‘going dark’ PR was issued.

  23. bz

    what % of the market cap is the buyback. I’ve found that with CEFs buying back 25% of the float it usually happens that some people forget to tender and they end up buying 40% of what u tender.

    any thoughts?

    1. dt

      As this tender is only for 6.6% of the outstanding stock and current share price is significantly below tender price, the offer will surely be heavily oversubscribed – I expect only 10%-15% of the tendered shares will be accepted.

  24. Eli Schwab

    Do you expect share price to increase as we get closer to the 15th expiration date?

  25. Mike

    I think the prices will settle somewhere around 23.25 as it was before the tender announcement

  26. Double D

    This deal has turned to crap as a result of the odd lot preference being terminated. I expect that anyone who is tendering will get pro rated to an amount less than 10% of what they tendered. The odd lot tender game is over.

  27. Terence

    Nuggy, I’m surprised not all tendered.

    22.2m shares were tendered, out of 27.1m shares outstanding. Apparently, 5m shares, or a whopping 18%, prefer $23 over $28!

  28. bz

    they should sell the company for $28. obiously that’s what shareholders want

  29. Random Deals

    BLBD is down almost 13% over the last two days. People are just getting rid of shares that were not accepted in the tender? Nothing has changed in the fundamentals of the company right?

  30. Martin Hernon

    It’ll be sad if the odd lot tender game is over, but revising terms in the middle of the deal is hopefully a one-time event! Costly trick for me because I had in several accounts

  31. makarid

    The oximoron is that the majority shareholders that wanted to amend the odd lot claus are the ones that suffered the most for this cancelation. If they didn’t cancel the odd lot clause their proration factor would be the same, but the stock will not lose so much value after the expiration. Because of their action, they created a huge sell interest in their own stock. This deal was a lesson for everyone.

    1. mcg mcg

      I don’t agree with this. The majority shareholder would have been prorated much more than 8% if they hadn’t changed the terms.

  32. Jim Rivest

    “If they didn’t cancel the odd lot clause their proration factor would be the same.”

    I’m not so sure about that, as almost every odd-looter I know sold and did not tender. The day the PR hit where the odd lot provision was removed, you literally saw hundreds of 99 share lots being sold in that last half hour of the trading day and many times more than that in the days after. I don’t know what the percentage of odd-looters there were in the 5M shares that did not tender, but my guess it was not insignificant and the big shareholder also knew that.

    1. YVRtrader

      Clearly the majority shareholder’s desire to get as many shares sold as possible was the reason for the odd lot cancelation.

      I bought a few shares past few days for a bounce, likely oversold…not a recommendation.

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