The board of Pivot Technology Solutions, a California-based TSX Venture listed company that recently agreed to a share exchange whereby several insiders would acquire control without having to pay any cash, have now been placed on notice by one of its large public shareholders.
A few days back when Pivot announced its support for a deal whereby shareholders (apart from the what Pivot calls a “Founder Group” which owns 18 per cent) would exchange their common shares for higher yielding preferred securities, Toronto-based investment company Torrent Capital said it “vehemently opposes” the arrangement.
Torrent, which has in regards to a five percent stake within the company that has about US$1.5 billion in revenue, listed its objections: the deal undervalued Pivot; control was being given up for no premium with no cash payment; all of the upside would flow towards the so-called Founder Group; and the insufficient a proper valuation. Torrent said hello was looking forward to dealing with other stakeholders in order to “maximize shareholder value.”
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Other your customers joined in: Ralph Garcea, an analyst at Cantor Fitzgerald issued a report and posted a one-year target of $1.50 or twice the value Pivot had assumed when valuing its common shares that’ll be transformed into preferreds; other investors noted they bought Pivot because of its growth potential and not for the yield on its about-to-be-issued preferreds; others wanted Pivot to do an auction to obtain more bidders; as the market adopted the vista the offer wouldn’t close because the shares remained well below the $0.70 per share deemed value.
Since then Pivot has filed more information concerning the transaction and its plans as what is effectively a private company. The result: Torrent likes what it sees even less.
Torrent’s attention was attracted to Schedule D of the so-called Arrangement Agreement. Referred to as Consulting Agreement between Inflexionpoint Asia Pte. Ltd. and Pivot. According to that agreement, Inflexion is really a private company whose mandate “is to produce a multi-billion dollar, emerging markets-focused IT logistics company.” In the agreement, Inflexionpoint says it “desires to engage Pivot to help Inflexionpoint in rolling the business outside North America.” Under the relation to that agreement, Inflexionpoint pays Pivot “an all-inclusive yearly fee of US$1.5 million,” for any selection of services. Anything has a 10-year term.
In addition, the consulting agreement notes, Inflexionpoint goes into a revenue sharing arrangement with Pivot that pertains to “any direct new international business obtained by Inflexionpoint with the leveraging of key relationships introduced by Pivot to Inflexionpoint.
Those developments C which Torrent deemed “a formal business relationship forwards and backwards entities meant to expand Pivot’s operations globally C have generated a wide open letter being sent to Pivot’s board. “It’s a fabric development for Pivot,” states the letter.
More disturbing for Torrent is “the overlap in corporate structure between the two entities.” Specifically two members of the Founder Group will also be founding people in Inflexionpoint, while John Sculley (Pivot’s chairman) can also be chair at Inflexionpoint.
Now Torrent wants the board to “initiate a complete and fair independent business valuation and strategic review;” for this to drag the going private transaction and asks that “those individuals who are clearly conflicted within the proposed agreement have simply no input or influence within the special committee from here forward.”
Calls to 1 person in the Founder Group were known the head of Pivot’s special committee who will be readily available for an interview Thursday.
bcritchley@nationalpost.com
