NEW YORK, June 3, 2015 /PRNewswire/ -- SpringOwl Asset Management LLC and its affiliate funds ("SpringOwl") are shareholders of OM Group, Inc. ("OMG" or the "Company") and have spent considerable time and resources analyzing the Company and coming to the view that OMG's common stock trades at undervalued levels and offers tremendous potential upside to patient long-term investors. SpringOwl has reviewed the June 1, 2015 press release issued by OMG announcing that the Company had entered into a definitive agreement to be acquired by a consortium of affiliates of Apollo Global Management, LLC and Platform Specialty Products Corporation (together, the "Apollo Parties") at a price of $34.00/share. This price represents only an approximate 28% premium to OMG's immediately prior closing price on May 29, 2015, an approximate 1% premium to OMG's 52-week high, an approximate 17% discount to OMG's five-year high, and a greater than 50% discount to OMG's all-time high.
SpringOwl believes that OMG is on the verge of moving past a number of self-inflicted operational issues, including: (i) a value-destructive M&A binge at a cost of approximately $1.5 billion, (ii) woeful historical ROIC and ROE measures versus the Company's Proxy Peer Group over one, three and five-year periods, (iii) lackluster EBITDA margins as compared to the Company's Proxy Peer Group, and (iv) a seemingly bloated SG&A structure.
It appears that the Board did not engage alternative buyers for the Company. Given the close-to-trough levels of the Company's stock, as well as the Board's historic "friendliness" with management (which led to a less than favorable "Say-on-Pay" vote in 2012) we cannot help questioning whether the sale process was structured to maximize value to OMG shareholders, or, instead, to favor the Company's management team through an ongoing partnership with the Apollo Parties. SpringOwl's analysis notes that the proposed transaction is all cash, squeezing out public shareholders from all benefits of OMG's future growth and value creation from its vast array of businesses. Notably, Platform has publicly referred to the enormous synergies it expects to reap from the transaction, synergies in which OMG shareholders will not have the opportunity to participate.
Accordingly, SpringOwl requests more thorough disclosure and the application of greater scrutiny to the sales process to ensure that the process was not designed to favor the buying group at the expense of shareholders.
Further, it is highly troubling to SpringOwl that this Sale Agreement apparently was entered into prior to the seating of the two nominees of FrontFour Capital Group that OMG agreed, as part of a recent settlement, to place on OMG's management-backed Board slate for the upcoming Annual Meeting. We also note with interest that the Board includes a former partner of the principals of Apollo from when they were all working at Drexel Burnham Lambert. We are troubled by an appearance of a potentially "clubby" atmosphere in which shareholder interests were not necessarily prioritized. We note that in January 2015, FrontFour estimated the per share value of OMG, pending implementation of their proposed plan, to be approximately $60.00 per share (a greater than 75% premium to the $34.00 per share price in the proposed transaction). Given the Company's decision to place the FrontFour nominees on the slate, we question why OMG would enter an agreement to sell itself at this exorbitant discount to FrontFour's value estimate prior to the seating of these nominees.
Andrew M. Wallach, Managing Member of SpringOwl, stated, "We purchased OMG intending to be long term participants in what we believe will be substantial value realization by the Company. We have real questions about a process that seems to have been geared to a single buyer in the absence of competition." Mr. Wallach added, "we believe that appropriate measures for fair change of control value are determined by assessing net present value of discounted cash flows and/or valuation multiples of prospective cash flows, and we encourage greater disclosure of the Board's methodology in supporting a seemingly lowball price for our Company."
SpringOwl's policy is to view any so-called "deal protections," which impede higher and better offers providing greater value to OMG shareholders, with great suspicion. This is especially so when there is legacy management continuation or sizable severance payouts. Limited windows for superior offers and "break-up" fees are examples of such deal protections that may not serve selling shareholders well and require great scrutiny.
SpringOwl Associates LLC (the "Adviser"), a New York limited liability company, commenced operations in 1970, under the name of Cumberland Associates, and is wholly owned and controlled by SpringOwl Asset Management LLC ("SpringOwl"), a Delaware limited liability company founded in 2013. The principal owner of the Adviser is SpringOwl. The principal owners of SpringOwl are Jason N. Ader and Andrew M. Wallach.
SOURCE SpringOwl Asset Management LLC