Ridiculous Privatization Attempt: 40-70% Bump Expected
This is one of the most ridiculous lowball privatization attempts I’ve seen. The controlling shareholder has made an offer at roughly cash value, implying the operating business, which generates substantial free cash flow, is worth nothing. The offer is essentially dead on arrival and will need to be raised significantly. Even if the special committee somehow approves it, shareholders won’t. The approval threshold is high, and pushback has already started, with at least one activist urging rejection.
I think the bid is serious and several details point to deliberate preparation and intent rather than a random opportunistic attempt. Even after taking into account a substantial price bump, this would still be a very attractive/no-brainer deal to the buyer. I don’t think it will walk away easily from this deal.
Applying a modest 2x-3x EBITDA multiple to the operating business and taking net cash at face value gets you to 40-70% upside from current levels. While that would arguably still be below the actual fair value, minority shareholders would probably just take the money rather than risk returning to the status quo.
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