When one share class prices in a buyout and the other doesn’t.
A private equity firm recently paid an enormous premium to take control of a company. Since then, it has overhauled the board and moved to form a special committee to weigh a full buyout. Any deal would have to come at a premium to current levels in order to win minority shareholder approval.
The company runs two share classes, and they have told very different stories since the ownership change. One has already run up, likely largely on takeover speculation. The other has not moved much, outside the general industry volatility, despite carrying the same vote on any privatization for the next couple of years – a protection the old board negotiated on its way out. The market seems to be pricing this share class as if that vote will not matter, as if the new owner could somehow push through a lower offer for this class alone. That’s clearly not the case here.
The protection of voting equalization for both classes on privatization matters was not properly explained in the press releases. Instead, it was buried in the legal documents. The market appears to have largely missed this, which likely explains the divergent pricing between the two share classes. The opportunity in the lower-priced share class looks attractive.
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