Welcome to Canada, where it appears the rules as practiced favour issuers, insiders and also the agents who service them. The rights of shareholders, the other group required for capital formation, seem quite a distance on the list – and additional down when minority shareholders would be the spotlight.
The latest example of that process has been played out now. The transaction concerns Opta Minerals Inc., a little TSX-listed company which has decided to be acquired by Speyside Equity Fund, a U.S. private-equity group which has partnered with Opta’s interim leader.
The transaction, blessed by the financial adviser and also the board, seems assured of success: SunOpta Inc., Opta Minerals’ largest shareholder (with a 65.8 per cent stake) has signed an “irrevocable support and voting agreement” using the buyer. And those agreements “cannot be terminated in the event of a superior proposal.” (The second-largest shareholder didn’t provide such an agreement.)
In other words, the largest shareholder, without any board representation, wanted out and it set the price. For Mississaugua, Ont.-based SunOpta, the proceeds received are a rounding error C which might result in a question at its annual meeting: Did you maximize value on the sale?
At time, SunOpta (market cap, $700 million) said the sale of their Opta interest “represents a significant milestone, and we’re very happy to be concluding this chapter in our company’s history as it makes way for SunOpta to really become a pure-play healthy and organic foods company.” Reached Monday, SunOpta said: “We aren’t going to expand what we said.”
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The transaction has upset one minority shareholder that has written to Opta indicating its displeasure using the offer.
So do you know the concerns?
? The low price: Opta shareholders are being offered 52 cents a share. At this level, the consideration is below the recent trading price: Per month back, for instance, the shares were changing hands at $1.10. On Monday Opta was trading at 75 cents.
Not only is the offer lower in regards to the trading price C meaning shareholders don’t get a premium C it is also low in relation to net asset value. At Sept. 30, Ontario-based Opta, which produces a lot more than US$100 million in revenue, determined its “tangible net worth” to be US$17.16 million. With 18.129 million shares outstanding, that’s US95 cents a share. In the current exchange rate, the offer price is about 40 percent of Opta’s tangible net worth.
Using another measure – the multiple of EBITDA – the sale is under 3 times. In some countries there’s capital punishment for lesser offences.
? The timing: The deal was announced the day after the Opta shares were to be delisted. News of this delisting was indicated last September and firmed in mid-January. The offer came carrying out a strategic review that were only available in June, 2014. Back then the shares traded at $1.80. Additionally, it came after certain agreements have been reached with its bankers after restructuring efforts “were substantially complete.” Those conditions could signify better times at Opta C that will now be enjoyed through the new owner.
? The approval process: As with such transactions, approval from two-thirds of those that vote and from the majority of the minority is required. But because of the “irrevocable” support and voting agreement entered into by SunOpta (plus some insiders) it appears pointless to carry a meeting. Why? The transaction has enough votes already “to satisfy all shareholder approval requirements required.” Why? SunOpta’s stake is counted included in the minority because it’s a “disinterested party.”
Financial Post
bcritchley@nationalpost.com
