Razor, ABTX is a rollup of turfgrass and seed distributers. This sector (Pioneer Hybred, Mycogen, DeKalb the latter being purchaced by Dow and Monsanto respectively) got a bit of attention last summer due to M&A activity with the chemical giants buying up seed companies for "germoplasem inventory" While this is true with cash crop seed companies (ABTX is not in that catagory like Pioneer) it doesn't appear anyone is wanting to bite on the value of being a turfgrass seed company. ABTX is the collection of a very large number of smaller companies (distributers and trufgrass producers a low tech business). The depressed prices in the farm belt and troubles in Latin America also play a negative role in the outlook for ABTX. The departure of management who put this thing togeather could be followed by a variety of revelations that the past strategy failed giving licence for new mgmt to parade their problems out in public as part of new mgmt's purging of the past. This is generally a necessary corporate exercise which makes the company look very unattractive, after which new management can begin the process of rebuilding resulting in improved results for shareholders.
the crux of ABTX was they were widely expected to be a takeover target (misunderstood and valued with the likes of Mycogen and DeKalb one brokerage had a buy with $30/sr target out on them and has since downgraded ABTX), Merrill (I seem to remember) was enlisted to "find strategic" alternatives which after 2-3 months resulted in ABTX's abandoning this (probably cause they couldn't find a buyer who would rationalize managments past aquisitions), resulting in the issuance of Conv. debt and their present problems.
Management had a dream and it didn't quite fit with reality.
To be a investor in this company you have to believe in the value of "their research and germoplasem inventory". I frankly don't know if that was a pipe dream or if their timing was off and it could be in the future.
From their latest 10Q (2/19/99)
>In connection with the anticipated integration of the acquired companies, the Company previously announced it expects to record a non- recurring charge of between $5 and $15 million during Fiscal 1999 consisting primarily of severance and other personnel related costs and costs associated with consolidation of facilities. The Company expects to vigorously implement its anticipated integration plan resulting in a restructuring charge that will be at the high end of this range, and possibly above it.
ABT has recorded a significant amount of goodwill relating to the acquisitions completed to date. Although the Company believes that goodwill is recoverable from future operations in its current operating structure, as part of the Company's planned restructuring, it is likely that product portfolios, facilities and brands will be consolidated and, therefore, it is possible that some portion of goodwill will become impaired. Therefore, management intends to again review the recoverability of goodwill at the time of the restructuring to determine if any impairment has occurred and, if so, record a write-down to reflect such impairment. A write-down of goodwill would be a non-cash expenditure and likely be additive to the restructuring charge.< |
