Another voice was put into their email list requesting /demanding that the board of TSX-Venture listed Pivot Technologies Solutions does something to enhance shareholder value and seek a much better offer for the company that designs, sells, integrates and supports IT solutions
The company has agreed C subject to a shareholder vote C to a proposal where the shareholders, apart from the so-called Founder Group, would convert their stake to high distribution paying preferred securities. In this way all of the upside at Pivot C which employs almost 800 people and which generates US$1.5 billion in revenue – would flow towards the Founder Group which owns about 18 per cent from the common shares.
But that proposal has attracted its share of critics including Torrent Capital, a shareholder that owns about five percent itself and speaks for another seven per cent. Torrent, which has expressed strong disagreement with the deal because it undervalues Pivot, has presented a multi-part plan to boost shareholder value. Torrent ‘s opposition to the deal increased if this was revealed that Pivot and Inflexionpoint (a personal company started through the same individuals the Founder Group at Pivot) would sign a consulting and revenue sharing agreement included in Pivot’s intend to expand into Asia.
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Another observer, An investment Doctor writing on Seeking Alpha, said that he was “not in love with the offer as the offered preferred securities are non-cumulative and callable,” adding “additional sweeteners is going to be needed to convince me.” The Investment Doctor said he would “prefer a straight cash offer,” with another criticism being that “the current shareholders of Pivot TS are now being put on the sidelines when it comes to the decision making process.”
Now Ralph Garcea, an analyst at Cantor Fitzgerald has weighed in again. Garcea, who like all of those other Street is anxiously awaiting the discharge of Pivot’s fourth quarter financials, previously called on the company to do an auction, and has a $1.50 price target.
This time round, Garcea used the current sale of U.S.-based Ingram Micro to Chinese-based Tianjin Tianhai for US$38.90 a share to issue another report and demand an auction of Pivot.
“This is why we would like a bidding,” wrote Garcea in a note to clients Thursday. Ingram Micro may be the number 1 global technology useful reseller (VAR). Tianjin Tianhai has developed from the traditional marine shipping company into a modern logistic industry investor and operator,” he said when referring to the sale that he says represents a company value/EBITDA multiple of seven times “and easily takes out Ingram Micro’s five year high.”
Applying the same multiple to Pivot leads to a share price between $0.75-$1.50 a share.
In his note, Garcea asked: “Who’d have thought a Chinese logistics company wanted a worldwide IT value added reseller?”
Given this week’s cope with Ingram Micro and also the Chinese buyer, Garcea believes there’s two possibilities from the current embroglio: a strategic or private equity finance buyer to part of and provide a superior proposal, or management to up their bid within an all-cash offer.
“Pivot would take advantage of an auction tactic to maximize shareholder value C and remove the all-time high in stock price as a minimum valuation,” he wrote.
