Merger Arbitrage – 5% Upside
This is an interesting management privatization of a tiny conglomerate that was recently highlighted by Alpha Vulture. Trading liquidity is very limited. The timeline is short with the transaction expected to close in a month or less. ALJ Regional Holdings is a $73m market cap consortium that owns a call center business, an industrial coating services business as well as equity/debt investments in several other companies. The company is getting taken private by its major shareholder and CEO Jess Ravich who owns 59% stake. Accredited investors, who submit evidence of their accreditation status, will get their stakes automatically rolled over into a private company. All the others will receive $1.97/share in cash. There is a 10-cent spread to the offer price. Shareholder approval is pretty much guaranteed as only 7% of total outstanding shares not owned by Ravich have to vote in favor of the offer whereas the other executives and their affiliates own 13%. Most of the shareholders would probably be happy to exit this illiquid OTC-listed stock and finally get away from Ravich, who does not have the reputation of looking after the value of minority shareholders. ALJJ’s recent tender offer (completed in Dec’22) to acquire 28% of outstanding shares ended up oversubscribed and priced near the upper limit at $1.99/share (i.e. near the current bid price). Shareholder meeting is set for the 10th of May and the transaction is likely to close shortly afterwards.
Ravich has solid financial incentives to proceed with the takeover, so the risks of the buyer backing away seem minimal. To cash out all other shareholders except the execs and affiliates (which own 72% combined with Ravich), the CEO will have to pay around $14m. This compares to $43m of ALJJ net cash + industrial coating segment that was acquired in Sep’22 for a total consideration of $21m + potential earnout of up to $25m related to the sale of two call center business verticals completed in Apr’22 + any value that the remaining call center business might fetch.
Proxy mentions appraisal rights. Maybe a bunch of us can get together and file?
ALJJ shareholders approved the transaction, closing expected by the end of May, the exact date has not been disclosed. Spread is now minimal and liquidity non-existent, so just waiting for this to close.
https://www.aljregionalholdings.com/2023-05-12-ALJ-REGIONAL-HOLDINGS,-INC-ANNOUNCES-RESULTS-OF-SPECIAL-STOCKHOLDER-MEETING,1
Anyone get corporate action notice yet, don’t see any in IB?
Fidelity has nothing
Still have not received any notice or consideration in IB for ALJJ. I have tried contacting IR and ALJJ’s counsel of record without response, finally filed sec complaint this morning. Any information appreciated.
Received call back from IR that transmittal letters went out yesterday, so hopefully this process will not be too protracted
Has anyone received a notice about this election from their broker? I saw simcha123’s comment and expected to see a notice of a corporate action or some such notification by now but haven’t seen anything.
Was warned by IR that the whole thing could take 6 weeks from delisting day, back on delisting day. Simcha has fresher news than I
I intend to give IR another call next Tuesday, will report back if no news has been posted
IB posted corporate action this past Friday, looks like it may be a few weeks until cash is received, given ten day period to establish who is accredited noted on the letter
Has anyone received the cash for their shares yet? Thank you!
Using fidelity – no
Looks like July 21st is the new date of close, https://finance.yahoo.com/news/alj-regional-holdings-inc-announces-213300469.html
Anyone have an update as to when to expect the cash to show up in accounts? I left messages with IR, have not yet been returned.
Here is the email I received from Jess Ravich, CEO
Good morning. All the funds should be disbursed on August 4th. If you don’t see them hit up please get back to me and thank you for having been a shareholder of ALJ
Jess.
Thank you! I was about to contact them.
It’s unusual to keep your shareholders this much in the dark.
Still have not received the funds, has anyone?
Just received it now at IB