wow its been a while and I guess a lot has happened
Anyone remember Carlson Online. Nasty little suit going on.
marketwire.com
Minority Shareholders of MPL Communications Inc.
Oct 28, 2008 09:00 ETMPL Insiders Trying to Buy Cheap Ahead of Nov. 17 Trial, Minority Shareholders Warn
VANCOUVER, BRITISH COLUMBIA--(Marketwire - Oct. 28, 2008) - Minority shareholders of MPL Communications Inc. (TSX VENTURE:MPZ) are being asked to sell out at a price of 8 cents a share, just 13 days before a legal case goes to trial that could see the stock worth many times that amount.
MPL's controlling shareholders have set a deadline for their offer for all outstanding shares of November 4. A group of three minority shareholders launched a lawsuit in 2003 (the Shareholder Litigation) alleging that MPL's controlling shareholders had improperly extracted millions of dollars from the company, and that case is scheduled to go to trial in Calgary on November 17.
The lawsuit seeks to force MPL Chairman Stephen Pepper, MPL President Barrie Martland and related companies and individuals to repay more than $8.3 million, or 29.39 cents per share. (The offer cites exposure of $5,750,000 or 18.88 cents per share, but does not include additional repayments sought for interest and legal costs charged to MPL by the controlling shareholders.)
On October 22nd, the group behind the Shareholder Litigation -- former MPL executive David Carlson, his wife Sarah James and the Carlson Family Trust -- asked the Ontario Securities Commission (OSC) to intervene to block or delay the offer from MPL insiders.
Its submission to the OSC suggests that the "opportunistic" November 4 deadline for submitting shares under the offer is really intended "to enable the insiders, at a small fraction of their personal substantial litigation exposure, to buy out the long-suffering minority and thereby, following an adverse result in the Shareholder Litigation, enjoy the benefit of paying back many millions of dollars simply to themselves." According to the Offer itself, the total amount required to purchase all of the minority shareholders' shares, and thereby reap the benefit of the $8.3 million sought to be repaid, is $645,240.
The independent committee of MPL's Board of Directors responsible for assessing the insider offer hired Kalex Valuations Inc. to provide a formal valuation and fairness opinion. Kalex, however, reported that it was "unable to independently verify" management's and directors' contention that the Shareholder Litigation is without merit, and therefore advised that it "cannot conclude as to the fairness of the offer."
In its submission to the OSC, the minority shareholder group suggests that the independent committee abdicated its proper responsibilities by either failing to seek or failing to disclose a legal opinion on the merits of the litigation. "Having sought a fairness opinion and then having been told that none is possible without a proper assessment of the Shareholder Litigation (or waiting for its determination at trial in a few weeks), they simply now seek to plow ahead without it."
The Carlson group's application to the OSC notes that because Kalex was unable to determine the likely outcome of the litigation, it could give only a "limited valuation opinion" that suggested a wide range from a low of $0.07 per share to as much as $0.26 per share. The application adds that the Kalex opinion also ignores the effect of litigation on the cash flow forecast used for company valuation, which would increase the company value by a further $0.09 per share.
The complaint to the OSC draws parallels to the 2005 case involving Conrad Black and Hollinger Inc. "Plainly the circumstances created by the allegedly improper conduct of the issuer and its insiders are, as in Hollinger, precisely what stand in the way of a proper valuation. Such is not permissible."
The Carlson group is asking the OSC to delay the offer either until shareholders can see the outcome of the lawsuit that goes to trial in less than two weeks or until the independent committee of MPL's Board obtains and discloses a legal opinion on the merits of the litigation. It also suggests that the OSC insist on inclusion in the offer of a contingent cash payment that would enable any minority shareholder who tenders to benefit from the outcome of the litigation.
More details about the lawsuit can be found at www.mplshareholders.com.
For more information, please contact
Minority Shareholders of MPL Communications Inc.
David Carlson
(604) 787-3465
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