[ Cossette undervalued by Duffar bid: industry experts ]
July 20, 2009 | Comments
Cossette Inc. shares surged Monday after two lead partners of the advertising and communications company announced an unsolicited cash takeover proposal that values the firm at $82.7 million—a bargain according to industry experts.
Cossette shares gained nearly 50%, trading up $1.60 at $4.85 in early afternoon trading on the Toronto Stock Exchange, after the informal proposal was announced.
Cosmos Capital Inc., headed by Francois Duffar, former vice chair and president of Cossette, is offering $4.95 cash per Cossette share, a 52% premium to the Friday closing price for Cossette shares at the Toronto Stock Exchange.
The offer applies to 10.38 million subordinate shares outstanding plus 6.3 million multiple-vote shares that would be converted to subordinate shares in October.
The total value of the shares would be worth $82.7 million. However, Cosmos already controls 3.1 million shares or 18.7% of Cossette’s outstanding shares, worth $15.4 million at the proposed price.
Cossette said its directors would meet later Monday to discuss the offer.
Industry observers said the purchase offer suggests an internal war has gripped Cossette, whose shares have plummeted in recent months.
“You don’t do that to your partners in a public forum,” said one analyst who didn’t want to be named.
He said Cosmos is trying to capitalize on Cossette’s low share price, but that the offer isn’t adequate.
“In our view, as far as a takeover for the company, I don’t think it accurately reflects the true value for a company including a takeover premium.”
“It’s a good buy,” Frank Palmer, chairman and CEO of DDB Canada told Marketing. “[Cossette] still has a lot of good clients... but the right price is not $4.95 per share.”
Last year Cossette reported more than $253 million in gross income. Palmer said that recent client losses such as Bell have hurt the company, but it remains a “very strong agency and not to be taken for granted. They’re not in any trouble at all.
“If it went for $4.95 a share, you’d be getting one of the biggest and best agencies in Canada for a very little price,” he said.
Cosmos just registered as a company July 13. Duffar announced his surprise departure from Cossette in May after 35 years with the Quebec City-based firm.
“We are seeking to work together with the board of directors and holders of multiple voting shares of Cossette to conclude a supported transaction that is compelling to the shareholders, clients and employees of Cossette,” said Duffar, in a release.
Cosmos also said it has the support of Burgundy Asset Management Ltd., which owns about 1.8 million of Cossette’s subordinate voting shares, making it owner of about 11.1% of Cossette.
Burgandy has agreed to tender its shares to the Cosmos offer, although it can terminate the lock-up agreement if a superior offer isn’t matched by Cosmos.
Besides Duffar, the Cosmos group includes Georges Morin, former senior vice-president of Cossette who just left the company on Saturday, former BCE chief executive Jean Monty, who is now president of Libermont Inc., Daniel Bernard, president of Provestis and current chairman of Kingfisher PLC, as well as an unnamed
Duffar said the involvement of North American and European investors will allow Cosmos to strengthen Cossette’s global positioning and presence.
It plans to present a “more integrated offering” and would “welcome enthusiastically the continued participation of the existing senior management team.”
Besides Duffar and Morin, the holders of the multiple-vote shares are Claude Lessard, chairman, chief executive and president of Cossette, and Pierre Delagrave, president of Cossette Media and Fjord Interactive.
According to a 1999 trust agreement, the multiple-vote shares must be converted to subordinate voting shares in October on a one-to-one basis if the principal shareholders (Lessard and Delagrave) don’t represent 30% of the aggregate number of multiple voting shares. —Canadian Press with files from Jeromy Lloyd
