The war of words between Torrent Capital, a significant shareholder in Pivot Technology Solutions, and also the company about how better to proceed in light of a proposed going private transaction continues.
Torrent fired the latest salvo now C the 3rd it’s made since Pivot announced its share exchange transaction two weeks back. Torrent said it represents the interests of holders of about 12.2 percent from the company.
Torrent’s statement was made a couple of days after Pivot provided “further clarification” on its “share exchange transaction,” that will, provided shareholders agree, hand charge of the organization to a group of insiders, with the remainder of the shareholders slated to possess preferred securities which are set to pay higher distributions than are now paid around the common shares.
That transaction is becoming controversial for several reasons, including:
The extent to which Pivot searched for alternatives either before or after the so-called Founder Group (the insiders) lobbed its proposal in early this past year. In the statement, Pivot said although it held discussions with three investment dealer firms, it “elected to not engage in a proper tactic to seek potential alternative transactions, as it was considered unlikely that the superior proposal would materialize;”The plans for any “private” Pivot. When the deal is approved, Pivot will sign a consulting agreement with Inflexionpoint, a private company founded by some of the identical people who founded Pivot. Pivot said the proposed consulting agreement can offer US$1.5 million annually, will run for Ten years and “provides additional cushion with regards to the proposed distributions on the Preferred Securities.”
In its latest statement Torrent has replaced its previous stance of “vehemently” opposing the transaction, having a six-point alternative plan. While it still believes the proposed transaction “blatantly short changes Pivot shareholders to the benefit of a select few insiders,” it believes its plan would benefit all shareholders.
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- Shareholders increase pressure on Pivot Technology to drag dealPivot Technology’s proposed takeover by founder’s group draws lots of flak
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Its proposals include: maintaining the present capital structure (which it argues gives shareholders a mix of income and potential capital gain); upping the dividend (to $0.054 a share from the current $0.03 a share, a do-able event given Pivot’s cash flow. Pivot started paying a dividend one year ago.); performing a strategic review along with a formal valuation (an increase up from the fairness opinion conducted on its proposed transaction); conducting a review to make sure executive compensation is “properly aligned with certain performance metrics such as revenue growth, margin expansion and increased profitability;” and moving the listing towards the TSX in the TSX Venture (Pivot, which generates a lot more than US$1.5 billion in revenue, became public in 2013 if this merged having a TSX-V listed capital pool company Acme Capital Corporation).
Torrent’s final request was for Pivot to supply “clarity” on its international expansion plans. Torrent want to understand how the proposed contract with Inflexionpoint will “impact” profitability and growth prospects. Torrent argues shareholders “would potentially benefit from international growth and expansion, however in light of the numerous conflicts of great interest, greater transparency and disclosure is required.”
So what’s next?
It’s a waiting game. Normally Pivot would make a circular for that upcoming shareholder meeting. But because of the opposition, circumstances may not be normal: Indeed Pivot has to judge the prospect of success of advancing its proposed deal versus abandoning the program and hearing its shareholders. To win, Pivot needs overall support from two-thirds of those that vote as well as the majority of the minority.
bcritchley@nationalpost.com
