Pacific Ridge Capital Partners Rejects Blount International's $10 Stock Buyout Price As an Insider Deal
President Mark Cooper Writes Strongly-Worded Letter to Blount Chairman Denouncing the Proposed Deal
LAKE OSWEGO, Ore., Dec. 16, 2015 /PRNewswire/ -- Pacific Ridge Capital Partners, an independent, employee-owned registered investment adviser, sent a pointed, vocal letter today to Joshua Collins, the Chairman of Blount International, Inc., protesting Blount's intention to be acquired by American Securities LLC and P2 Capital Partners, LLC.
According to a press release on the Blount website, the company has entered into a definitive agreement whereby Blount shareholders will receive $10.00 in cash for each share of Blount common stock they hold. This price is far below what Pacific Ridge feels is a fair valuation for the company, leading it to denounce the proposed deal as lucrative for Blount management and terrible for shareholders.
"It feels as if the board has fleeced the stockings of shareholders and left us with a lump of coal," said Mark Cooper. "This year, the company spent almost $20 million buying back stock at prices higher than $10. As little as six months ago, they were buying it back at $16/share and they claimed that price was too low. So why is $10 fair now?"
According to Cooper, the proposed deal sharply conflicts with Blount's own documentation regarding the value of the company. The Blount press release announcing the deal indicates that while the company is having problems, management has a plan to fix them—but at the expense of shareholders, 80% of whom will lose money on the proposed transaction. Using Blount's own financial projections offered in their June investor presentation, the proposed deal calculates out to a whopping 60% discount—great figures for American Securities and P2 Capital Partners but highly objectionable to current Blount shareholders. Pacific Ridge outlined these inconsistencies in its pointed letter to the Blount board.
"The timing and value of this transaction leads us to wonder whose interest the board is serving," commented Cooper. "It seems to me, and to the clients we serve who have invested in this company, that this buyout is beneficial only for Blount's management team. The shareholders who have supported Blount in good faith over the long haul are being left out in the cold."
There are other aspects of the proposed buyout that Pacific Ridge finds objectionable and suspect. The board agreed to a 50-day "go-shop" period during which the company can receive offers from other interested parties. This timeframe is so short as to make the preparation and presentation of an offer nearly impossible for other bidders. Also, the Blount board's public commitment to the current proposed deal with American Securities and P2 Capital Partners has likely discouraged others from making a valid counter-offer to the low $10/share price.
Pacific Ridge also objects to Blount's claim that the costs of being a public company are too high. "There are at least 2,000 small, publicly traded small companies that manage these costs without any negative impact. Blount is no exception," Cooper wrote in his letter. He cites the break-up fees as far more onerous to Blount than the expense of being publicly traded.
A copy of the letter to Blount, along with supporting documentation, can be found at the Pacific Ridge website at http://www.pacificridgecapital.com/.
ABOUT PACIFIC RIDGE CAPITAL PARTNERS
Pacific Ridge Capital Partners, LLC is an independent, 100% employee-owned registered investment adviser serving institutional and high net worth clients. The Company was founded by a seasoned group of investment professionals, comprising over 80 years of industry experience. The company employs a contrarian value investment management philosophy, generating its own investment ideas using fundamental analysis and bottom-up stock picking in its steadfast pursuit to deliver superior investment returns.
For more information, contact:
Pacific Ridge Capital Partners
Mark Cooper, President
[email protected]
(503) 886-8971
SOURCE Pacific Ridge Capital Partners, LLC
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