UPDATE ON CMLK:
question
I have read an article in the Boston Globe whereDDJ Capital Management was the successful bidder for Smith & Hawken, a division of CML Group for 75 million.
The DDJ bid which includes about 25 million of assumed debt, would amount to 15 times cash flow. Unsecured creditors, mostly investors who owned 40 million of convertable debt, beefed about the fast-track auction. But they dropped their objections after a settlement improved their odds of getting at least a little money back.
I hate to sound stupid, but I don't understand, does this mean that DDJ bought CML group and the stock may be worth something later, or does it mean that DDJ just bought the Smith & Hawken part and the common shares will be worthless?
Thank you in advance for any reply you can give me.
ANSWER
The auction was an auction to sell off the Smith & Hawken subsidiary only. Consequently, what is left in the CML shell (as I understand it) is any net proceeds from that auction (after paying off debt), plus a $31 million NOL tax benefit, plus any other dribs and drabs held by the corporation. With 62 million shares, an ultimate net of $25 million, for instance, would be just fine relative to current prices.
But, and this is an important but, just to further complicate matters, it is my understanding that DDJ ***continues*** to own a little over 10 million shares of the shell, CML, or to be more precise CMLK. They bought those shares last July for approximately 10 cents a share. (see 7/98 10Q). DDJ actually wears 3 hats here: they are the largest equity holder in CMLK, they ***were*** the largest unsecured creditor, and they are the purchaser of the S&H subsidiary. My own take on it is that they plan to make money on all three hats. DDJ is a venture/vulture capital outfit located in sylvan, scenic Wellesley, Mass. and composed (according to what is publicly visible) of three individuals: Dan Harmetz, David Brezzeale, and Judy Mencher. (Those spellings are from memory, so take them with sodium).
A similarly sizeably position is held by the other ***former*** major unsecured creditor, Wisconsin Investment Board, some of which was purchased last Summer also. Together, DDJ and WIB owned 35.6% of the company according to the last filing on the subject, last Fall. |
