This has to be the most pathetic statement from Luxton yet.
He isn't saving the company. He is saving himself.
'No plan ... and no point' to independent assessment of Allen-Vanguard assets: Luxton
By Krystle Chow, Ottawa Business Journal Staff
Mon, Sep 28, 2009 12:00 AM EST
Details are slowly emerging about Allen-Vanguard Corp.'s proposed privatization deal with Versa Capital Management, but many shareholders likely won't get the answers they're looking for about the company.
The defence products maker last week filed a redacted 242-page document that showed Versa, through a limited liability company, would be paying up to US$25 million to take over Allen-Vanguard, with a break fee of $7.5 million should the deal be terminated, and another $6-million fee to be paid by the lenders to Versa if they breach their side of the agreement.
Allen-Vanguard has also agreed to pay $5 million of the proceeds to lenders as a permanent reduction of its credit facility and its other debts will be restructured and reduced, with secured creditors agreeing to take less than they are owed.
Shareholders who contacted OBJ last week questioned the timing of Allen-Vanguard's $130.29 million in writedowns related to its acquisition of Med-Eng Systems, which severely reduced the assets of the company and further vapourized any value that might have been left for shareholders. The writedowns were booked in the company's third quarter and announced just a month before it reached its deal with Versa.
"Does this mean any company can just be sold off for the value of its debts, wiping out the share value? It seems like an easy way to pick up the company and save on the price," asked Ross MacLachlan, a local retail investor who said he's struggling to understand the structure of the deal and simply wants more information.
In particular, Mr. MacLachlan and others are wondering about why Allen-Vanguard's exclusive deal with Versa was stretched out to a five-month period, and why there were no competing bids that could have upped the value of the resulting deal. "If there's no competition, no one needs exclusive rights," he said.
However, Allen-Vanguard CEO David Luxton defended the move in an interview, emphasizing the fact that the company and its investment bankers had been looking for partners for over a year before exclusive talks began.
"The benefit of agreeing to ultimately enter in exclusive discussions with the one party was that it substantially improved the likelihood of getting to a deal, and there was no such equivalent level of interest forthcoming from any party," he said. "At the same time, the fact that the discussions with Versa were on an exclusive basis was not a bar to any other bidder coming to the table with an offer or expression of interest."
When asked if the company intends to provide an independent valuation of its assets as requested by many irate shareholders, Mr. Luxton said there's "no plan, no requirement and point" to obtaining such an assessment.
"This company was ... carrying a very large debt that it was not able to service, its lenders required that that debt be reduced and be reduced within a certain timeframe, and so that has been the driving imperative. The company is in default on that ... and it does not have the luxury of reflecting on what it thinks the intrinsic value of the business is."
"The value of the business has been determined by a process that has been extensive and ongoing and has resulted in one investor being willing to make a deal at a valuation that pays nothing to shareholders and something less of the full amount to debtors."
Mr. Luxton said he sympathizes with the shareholders as he himself has substantial holdings in the company, but noted that at the end of the day, the firm's obligation is to preserve the business as a going concern.
Any other deal, he said, could have resulted in the firm being broken up and sold off, and a bankruptcy protection filing would likely have damaged Allen-Vanguard's relationships with customers and suppliers.
Be that as it may, it's an outcome that may have shattered shareholders' trust. "If this is the way it does happen, I may need to start second-guessing my investment in any company going through a tough time, which will just make them go into tougher times ... Companies are always complaining they cannot raise funds in the private sector, and the more of these there are, the more difficult it will be," said Mr. MacLachlan.
"I'm just trying to learn a lesson here, but I don't want that lesson to be not to trust any company" |
