It took awhile, however in the end good sense won out: TSX-Venture listed Pivot Technology Solutions and also the Founder Group aren’t proceeding using their heavily criticized proposed plan of arrangement.
In that plan, shareholders apart from the Founder Group were being offered higher yielding preferred securities in exchange for their common shares. No cash was offered.
Plans required the private Pivot to then sign a 10-year consulting and revenue sharing agreement with Inflexionpoint, a personal company which has an overlap of personnel with the Founder Group. Pivot said the consulting agreement was necessary to help fund the distribution on the preferred securities.
Shareholders and analysts disliked the offer since the price being offered was lacking (one analyst estimated the “public” Pivot was worth twice what shareholders were being offered), since there was no auction to canvass potential customers and determine the best price, and since the transaction favoured the Founder Group, which was conscious of what a consulting and revenue sharing agreement could generate for that “private” Pivot.
Doug Stuve, chairman of the special committee put together to evaluate the sale from the Founder Group asserted “based on various factors, including feedback from your shareholders, the board and the Founder Group determined that it was in the Company’s best interest not to proceed with the transaction.”
But shareholders, who’d most likely have voted down the proposal, were thrown a bone: They’ll receive a higher dividend beginning with the second quarter. Description of how the will receive $0.01 one fourth C or $0.04 annually C up from a previous $0.03 per share each year. Pivot started paying a dividend in March 2015.
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Torrent Capital was certainly one of Pivot shareholders most in opposition to the transaction. Scott Gardner, the firm’s founder and managing director said Wednesday his firm was “pleased they’ve pulled this poorly constructed deal that from the outset was clearly away from best interests from the common shareholders. It’s unfortunate the procedure has shaken confidence in the board as well as in management.”
During the procedure, Torrent has put together its own proposal for that company. “What’s bothersome is the lack of information presented to common shareholders throughout the process,” adding “when dealing with an inside bid, there has to be to the next stage of knowledge dissemination.”
For its part, Pivot announced the proposed transaction at the end of January and provided an update a couple of weeks later. Torrent made three releases while the proposed transaction was live.
Torrent, with a six per cent stake and which spoke for a number of other shareholders, continues to be a firm believer in the company that generates more than US$1.5 billion in annual revenue. Gardner calls Pivot “a tremendous company that continues to be undersold by management and the board and we anticipate following through and create value for shareholders.”
Ralph Garcea, an analyst with Cantor Fitzgerald issued an email Wednesday that highlighted numerous unanswered questions including: whether the listing could be gone to live in the TSX; what is the status of the normal course issuer bid; and what’s the status of the consulting contract with Inflexionpoint.
Garcea, the only analyst covering Pivot, urged management to concentrate “on the active growth not complacency,” approach favoured by Torrent.
Pivot closed Wednesday at $0.51.
Financial Post
bcritchley@nationalpost.com
