Entries categorized as ‘Arbitrage’

Aspen Exploration Corporation: Liquidation May Still Have Value

January 6, 2010 · 6 Comments

Aspen Exploration Corporation (ASPN.OB) is being added to the ValueHuntr Portfolio. ASPN is an interesting special situations play we have been following for some time now. Based on yesterday’s trading price, we believe there may still be some value for shareholders in the event of a sale, merger or liquidation even after the payment of $0.73/share dividend.  For the purpose of keeping our estimates as conservative as possible, we assume at least liquidation value.

THE COMPANY

Aspen Exploration Corporation does not have significant operations. It intends to seek possible business combinations with third parties. Prior to June 30, 2009, the company operated 67 gas wells and had a non-operated interest in 26 gas wells in the Sacramento Valley of northern California and approximately 37 oil wells in Montana.

RECENT EVENTS

On November 30, 2009, Aspen held its annual meeting of stockholders in Greenwood Village, Colorado. Two proposals were submitted to the stockholders for approval as set forth in Aspen’s definitive proxy statement dated October 19, 2009. A total of 5,965,534 shares (approximately 70% of the total outstanding as of the record date) were present at the meeting in person or by proxy.

According to the 12/02/09 SEC Filing, Aspen’s stockholders did not approve the resolution to grant Aspen’s Board of Directors the discretion to dissolve the company. To be approved Delaware law required that this proposal be approved by a majority of shares outstanding and entitled to vote thereon. Although more stockholders voted in favor of the proposal than voted against it, only approximately 41% of the total shares outstanding and entitled to vote on the proposal voted in favor of its approval. As a result, Aspen maintained its corporate status and decided to explore other business opportunities.

On November 2, 2009 ASPN declared a cash dividend of $0.73/share. The news release describing the dividend said:

The distribution follows the final settlement of the sale of Aspen’s California oil and gas assets to Venoco, Inc., at which the parties made a number of immaterial adjustments to the purchase price paid at the June 30, 2009 closing, and made certain other payments that were not determined until after the closing. At the final settlement date Aspen received a net payment from Venoco, but was required to make various payments to third parties which ultimately resulted in a cash outflow from Aspen in an amount not considered to be material.

Aspen expects that after the payment of the dividend, and its anticipated operations through the end of the current calendar year, on December 31, 2009 it will have more than $3 million of working capital remaining. Aspen currently intends to utilize its remaining funds to maintain its corporate status as a reporting issuer under the Securities Exchange Act of 1934 and to explore other business opportunities. “

QUICK ANALYSIS

It is likely that if no interested buyer is found for ASPN’s remaining assets, the company will end up liquidating. Our rough estimates for an eventual liquidation, including expected operational expenses to be incurred until March, 2010 is shown below.

Currently trading at $30/share, our estimates show that there is still some value in ASPN. However, our estimates are highly dependent on the timing of the potential liquidation and on the assumptions outlined above. We believe that management will do what is right for shareholders, as the company’s CEO owns 20% of all shares.

THE BOTTOM LINE

ASPN has no significant operations, but it may have enough cash on its balance sheet to offer some value to shareholders. Although we wish we had a larger margin of safety, we believe it is likely that ASPN’s CEO will find the best deal for shareholders, or liquidate the company. As we have shown, even in liquidation the company’s value is above the company’s current price.

Categories: Arbitrage · Liquidation · Special Situations
Tagged: Aspen Exploration, ASPN, Bailey, Liquidation, Special Situations

Enpointe Technologies Inc. (ENPT) Completes Merger; Position Closed

August 12, 2009 · Leave a Comment

Enpointe Technologies Inc. (ENPT) has completed its merger transaction with Din Global Corp, and has been acquired for $2.50 per share. Previously, the company and third parties involved had set July 31, 2009 as the deadline for the completion of the merger. The deadline was later extended to August 14, 2009. For more, see SEC filing.

Categories: Arbitrage · Update
Tagged: Arbitrage, enpointe technologies, ENPT, Merger

Update: Life Sciences Research (LSR) to be Acquired in Going Private Transaction; Valuehuntr Exits Position

July 9, 2009 · 2 Comments

Bookmark and Share

Life Sciences Research, Inc. (LSR) announced today that it has entered into a definitive merger agreement to be acquired by Lion Holdings, Inc., an entity controlled by LSR’s Chairman and Chief Executive Officer, Andrew Baker, for $8.50 per share in cash. Mr. Baker currently beneficially owns approximately 17.5% of the outstanding shares of LSR.

On our March 16, 2009 post, we specified that LSR was a special situations play with a high probability of realization. We also pointed out that this was not a long-term play, as its mediocre earnings power did not make it a long-term value candidate. We are now closing our position on LSR, for an absolute return of 20%.

Under the terms of the merger agreement, LSR stockholders, other than Mr. Baker and his affiliates, will receive $8.50 in cash for each outstanding share of LSR common stock, representing a premium of approximately 77 percent over LSR’s closing share price of $4.79 on March 3, 2009, the last trading day prior to public announcement of Mr. Baker’s initial March 3, 2009 proposal to acquire the Company for $7.50 per share. The $8.50 per share purchase price also represents a premium of 13% over Mr. Baker’s initial proposal, and a premium of 18% over LSR’s closing share price of $7.18 on July 8, 2009, the last full trading day prior to today’s announcement.

A Special Committee consisting of LSR’s independent directors was charged with evaluating strategic alternatives for the Company and unanimously recommended approval of the merger. Based upon this recommendation, LSR’s Board of Directors (with Andrew Baker and Brian Cass abstaining), approved the merger and resolved to recommend that LSR stockholders approve the merger.

Lion Holdings, Inc. has secured equity and debt financing commitments that provide for the necessary funds to consummate the transactions contemplated by the merger agreement. The transaction is expected to close in the fourth quarter of 2009 and is subject to certain closing conditions, including approval by LSR stockholders.

 

Categories: Arbitrage · Investing · Special Situations · Update
Tagged: andrew baker, LSR, Merger, ValueHuntr

En Pointe Technologies, Inc (NASDAQ: ENPT)

April 28, 2009 · 4 Comments

Bookmark and Share

We are adding En Pointe technologies, Inc. to our ValueHuntr Portfolio. On March 1, 2009, the company agreed to be acquired for $2.50/share in cash. This represents a potential 13% absolute return relative to the company’s current price of $2.22/share if the merger is materialized, which we expect it will.

 

About

 

En Pointe Technologies, Inc., through its subsidiaries, provides information technology hardware and software products and services in the United States. The company offers a range of hardware and software products, such as desktop and laptop computers, servers, monitors, memory, peripherals and accessories, operating systems, application software, and consumables and supplies. It serves large and medium sized companies, and government entities. The company was founded in 1993 and is headquartered in Gardena, California.

 

Catalyst

 

ENPT’s Board of Directors, acting upon the unanimous recommendation of a special committee comprised entirely of independent directors, has approved the merger agreement and resolved to recommend that the Company’s stockholders vote in favor of the agreement. Pursuant to the terms of the merger agreement, the Acquiror has agreed to pay to the Company’s stockholders $2.50 in cash for each outstanding share of the Company’s common stock. The merger agreement contains customary representations, warranties and covenants made by the Company, including covenants that the Company will run its business in the ordinary course of business consistent with past practice and will refrain from taking certain actions between the date of the merger agreement and the date of closing of the merger.

Conclusion

We are adding En Pointe technologies, Inc. to our ValueHuntr Portfolio because we believe the probability that the merger will consummate before the end of Q3 is fairly high. Therefore, we see this investment as one which can provide us with a quick 13% absolute return with little to no risk.

 

The proxy statement submitted by ENPT regarding the special shareholder meeting prior to merger approval can be found here.

 

 

Disclosure: We currently have a position in ENPT

Categories: Arbitrage · Special Situations · Value Investing
Tagged: Arbitrage, En Pointe Technologies, ENPT, Merger, Special Situations

Life Sciences Research (NYSE: LSR)

March 16, 2009 · 3 Comments

In our view, LSR is a pure Special Situations/Workout play with a high probability of realization. At a market value of $90M, the company is trading nearly 11% below the purchase price of $100M offered by Andrew Baker, who serves as Chairman and CEO of LSR. It is our view that the company’s intrinsic value is lower than Baker’s purchase price of $7.50/share, so we are adding LSR to our ValueHuntr Portfolio as an arbitrage opportunity. We do not intend to hold LSR shares beyond $100M of market capitalization ($7.50/share).

 

About LSR

Life Sciences Research, Inc. is a global contract research organization providing product development services to the pharmaceutical, agrochemical and biotechnology industries. LSR brings leading technology and capability to support its clients in non-clinical safety testing of new compounds in early stage development and assessment. The purpose of this work is to identify risks to humans, animals or the environment resulting from the use or manufacture of a wide range of chemicals which are essential components of LSR’s clients’ products. The Company’s services are designed to meet the regulatory requirements of governments around the world. LSR operates research facilities in the United States and the United Kingdom.

 

Valuation

 

The company is currently trading at a market capitalization of nearly $90M, which is 11% lower than the $100M that Andrew Baker, the current Chairman and CEO of LSR, has proposed to purchase all of the company’s outstanding shares for. The latest balance sheet shows that as of December 31, 2008, the company had $171M of assets with $186M in liabilities. Though the company has enough cash to meet all near-term commitments, it is our view that this is a case where the private market value exceeds the company’s intrinsic value. With $15M in negative equity, any possible investment in LSR must be made having Andrew Baker’s $7.50 purchase proposal as the ceiling for the total value that could be realized by LSR stock investment. We view this as a special situations play with high prospects of near-term profitability, so we are adding LSR to our ValueHuntr Portfolio. However, we do not intend to hold the stock beyond $7.50/share.

 

Catalyst

 

On March 3, 2009, LSR announced that Andrew Baker, Chairman and CEO of LSR, has made a non-binding proposal to acquire all of the outstanding shares of LSR for a price of $7.50 per share pursuant to this letter dated March 3, 2009:

 

 

 

CONFIDENTIAL

Andrew Baker

401 Hackensack Avenue

Hackensack, NJ  07601

 

 

 

                             March 3, 2009

 

 

 

Life Sciences Research, Inc.

P.O. Box 2360

East Millstone, NJ  08875

Attention:  Board of Directors

 

Gentlemen:

 

I am pleased to present this non-binding proposal to acquire all of the outstanding shares of common stock par value $.01 per share (the “Shares”), of Life Sciences Research, Inc.  (the “Company”) for a price of $7.50 per Share.  I intend to effect the acquisition through an entity that I will control.

 

The proposed purchase price represents a 57% premium over today’s closing price of the Shares and provides an attractive opportunity for the Company’s stockholders to maximize the value of their investment in the Company at a highly uncertain and volatile time in the markets and the global economy.

 

I welcome the opportunity to discuss this proposal with the Board of Directors and its advisors as soon as possible.  My proposal is conditioned upon satisfactory completion of due diligence, negotiation of definitive transaction documents, receipt of the requisite financing commitments and receipt of necessary board approval.  If my proposal is of interest to the Board, I am prepared to harness the resources necessary to expeditiously negotiate and document the proposed transaction.  I have already begun exploring potential financing sources, subject to satisfactory confidentiality arrangements.  While I am confident that I will be able to secure the requisite financing for this proposal, there can be no assurance of success.

 

This proposal does not create any binding obligation, nor will I be deemed to have any obligation whatsoever to the company relating to a proposed acquisition of the company by virtue of this letter or any written or oral expression made by or on my behalf by me or any of my affiliates, advisors or agents unless and until mutually satisfactory definitive documentation has been executed and delivered by the parties thereto.

 

I look forward to discussing this matter further.

 

Regards,

 

s/ Andrew H. Baker

Andrew H. Baker

 

cc:  Mark Bibi, General Counsel

 

In general, we believe the likelihood of a $7.50/share purchase by Andrew Baker is high, so the probability of near-term upside to $7.50 is significant. At today’s price of $6.78/share, the company is trading at an 11% discount to Andrew Baker’s offer price.

 

 

Conclusion

 

With a negative equity, the company is not a candidate for long-term profitability. However, we believe this opportunity presents us with an attractive arbitrage with a high probability of realizing a quick 11% return. This is why LSR has been added to our ValueHuntr Portfolio.

 

 

[Full Disclosure:  We do not have a holding in LSR. This is neither a recommendation to buy or sell any securities. All information provided believed to be reliable and presented for information purposes only. Do your own research before investing in any security.]

Categories: Arbitrage · Investing · Special Situations · Value Investing
Tagged: Arbitrage, Special Situations, Value