The NUT-CBHI deal does not smell good.
Before you make any decision whether to buy/sell these two, here are few things you might want to know. Mauna Loa Macadamia Partners L.P. is referenced as "Partnership", C. Brewer Homes, Inc as "Homes". The information is from the Partnership proxy.
1. Partnership mandatory quarterly dividend will be replaced with annual dividend, which amount is likely to be decreased to about 40% of shareholder allocated share of income.
2. There is conflict of interest. Some of the directors of the Partnership are directors of Homes at the same time. Another company, CBCL (it's company name, not ticker), has direct/indirect interest and/or control in both Partnership and Homes
3. Homes incurred net losses for each of the fiscal years 96, 97 and for the first nine months of 98
4. Asset impairments at Homes were $1.3 million in 96, $3.5 million in 97, $0.64 million in the first nine months of 98.
5. Refinancing is required for Homes outstanding $21.2 million under credit facility with loans at 0.5% to 2.0% above Bank of Hawaii's base rate.
6. Hawaii already weakened economy is affected by the economies of Asia.
7. A derivative lawsuit has been filed against the Partnership, the Managing Partner, the five directors of the Managing Partner, Homes and CBCL. The suit alleges breach of fiduciary duties and requests that the Court enjoins consummation of the merger.
8. No ruling from IRS exists with respect to the federal income tax consequences of the merger; the partnership may lose its tax status
9. The tax liabilities of Homes for prior years, not audited, will become Partnership liabilities.
10. Homes unsuccessfully tried to find a buyer couple of times before.
11. Drought affected Ka'u orchards representing 48% in acreage but more than 50% in yields in a normal year.
In brief, without dividend, with book value decreased to $6, NUT cannot sustain current price, with CBHI to be priced accordingly. No arbitrage opportunity here.
Regards,
repnikk
|
