lessthaniv

Pretty much what I said in response to the press release I still don't understand, no? Anyways, enough of the gloating on my part. I've had my fun for the day and with that, I'll move on. TTT, Without the dilutive warrants in the way, I wonder if ABH will now reduce their minimum tender to 50%?

You misunderstood the press release. The warrants are redeemable by FBK if it receives a superior proposal and therefore ABH is not at all prevented from submitting a superior proposal. This isn't shark repellent - in fact its the opposite. The warrants are meant to dilute the hostile $1.00 bid so ABH can't get control of FBK through abusive actions to the minority shareholders. If ABH reduces their minimum tender from 66 2/3 to 50% and takes up the current 52% tendered, MERC will exercise the warrants and dilute ABH to 42%. ABH knows this and therefore will not take up shares now. All they can do is withdraw or bump their bid. I think we'll see the latter. Also, there's another valid reason for the warrants - FBK burned through cash defending itself against ABH. A financing makes sense. Go back to the Perpetual / Profound deal, you'll see a precedent for this: http://www.bennettjones.com/BennettJones/images/Guides/external7446.pdf Hey Jetsfan, Do you still think I misunderstood the press release? Yes I do. The warrants were meant to neutralize the oppressive lock-ups, not thwart a take-over. The BDR made an enormous error. I don't see how FBK's appeal cannot be successful. I'll admit you got lucky on your call. It was definitely a 100:1 shot. Ya ... that's what happened.

You misunderstood the press release. The warrants are redeemable by FBK if it receives a superior proposal and therefore ABH is not at all prevented from submitting a superior proposal. This isn't shark repellent - in fact its the opposite. The warrants are meant to dilute the hostile $1.00 bid so ABH can't get control of FBK through abusive actions to the minority shareholders. If ABH reduces their minimum tender from 66 2/3 to 50% and takes up the current 52% tendered, MERC will exercise the warrants and dilute ABH to 42%. ABH knows this and therefore will not take up shares now. All they can do is withdraw or bump their bid. I think we'll see the latter. Also, there's another valid reason for the warrants - FBK burned through cash defending itself against ABH. A financing makes sense. Go back to the Perpetual / Profound deal, you'll see a precedent for this: http://www.bennettjones.com/BennettJones/images/Guides/external7446.pdf Hey Jetsfan, Do you still think I misunderstood the press release?

(A) In the history of public market deals, have you ever seen a bidding entity happily increase their bid to IV in order to make shareholders under a hard lock happy? SD, this makes no sense to me. The whole point of getting FFH to commit to a hard lock is so they can't chase after a higher bid. That is what allowed ABH to perhaps get away with a weak bid and transfer the excess intrinsic value to ABH and away from the minority shareholders of FBK. Furthermore, if FFH was in fact displeased with Garneau's cowboy antics as you suggest then why is FFH seeking to stop the issuance of the warrants through the exchange? Additionally, three shareholders, including Fairfax Financial Holdings Ltd., which have entered into lock-up agreements with Abitibi and Steelhead Partners LLC, which is, like Fairfax, a significant shareholder of Abitibi, has also, through counsel, sought to stop the issuance of the warrants before the Toronto Stock Exchange. Your comments leading us to believe that FFH would prefer the $1.30/sh Mercer offer do not align with FFH's actions. (B) It seems to me that this is applying private equity theory to a public market deal. In the public markets, I would not expect the bidders to pay up for a contract that doesn't yet exist. I note that neither ABH nor MERC have offered prices that include that future potential revenue stream to any meaningful degree. The best hope for the FBK minority is to try and get a PPA in place, yesterday. With a new contract on the table the value of FBK then goes up. But what are the chances that it happens before the deals close? I would be willing to bet that whoever wins the bidding war will pay the lowest price they are able to pay inorder to win the deal. And until such time as a PPA is in place ... I won't expect that future cash flow to be fully valued.

This is the statement that bothers me the most: the fact that the transaction did not preclude a superior offer by a third party, and required Paramount to tender or vote any Profound shares acquired on the conversion of the special warrants in favour of a superior offer; As I stated earlier, I think ABH will argue this deal does have the potential to preclude a superior offer. We'll see though.... It's certainly been an interesting one to follow.

TTT, Fairfax has agreed under its Lock-up Agreement to elect to receive its consideration in the form of either the Cash Only Option or the Cash and Share Option, but not in the form of the Shares Only Option, in effect limiting the number of shares of Resolute Common Stock that Fairfax may receive under the Offer to 955,043. Resolute's offer limits the amount of new stock issued to approximately 3.7M shares. So, when FFH agreed to this condition it was in effect leaving more stock for the remaining shareholders to split. Dare I say it ... they did something nice for their partners! You'll note that the others parties involved did not agree to the same limiting condition under their lock up agreements. Here is an excerpt from the Globe and Mail article dated Dec 20th: http://m.theglobeandmail.com/globe-investor/investment-ideas/streetwise/hostile-takeover-bid-puts-fibrek-on-the-defensive/article2277573/?service=mobile “When Resolute, the old Abitibi, approached us, we felt this was the right operation with the right scale to acquire Fibrek, and here’s the key – Fibrek shareholders will receive Resolute shares that will maximize shareholder value over the long term,” says Mr. Watsa. “Our view is Resolute shares over time, the next three or four years, will do much better than Fibrek shares.” Fibrek’s shares have not performed well for a long time, he added. “Abitibi/Resolute is almost debt free, it’s a large company, and it’s come down by more than 50 per cent itself,” Mr. Watsa says. “So where would you put your money? Our thinking is we preferred to go with the large company whose stock is also undervalued and who is financially very strong and will recover. If Fibrek was to recover, Resolute will recover too. And it’s as simple as that.” <IV

TTT, The basic math for Mergers works like this; IValue of Combined Firm = IValue of Acquirer + IValue of Target + Synergies - Cash. You'll note that IValue of Combined Firm is maximized if synergies are high and IValue of the Target > cash paid. This much is intuitive. I believe that FFH felt ABH stock was worth more than it's market value at the time of the offer. The ABH offer at $1/share implies a stock paper price $15.83/ABH share for investors who want to end up with ABH stock. (.0632 * X = $1). My guess is this would include FFH & Pabrai given their existing positions in ABH. Now, if the cash paid < IV of Target (which I believe it is) and synergies are high (wood chips) .... the IV of the Combined firm would be maximized. But the benefit is even greater given your using ABH paper at $15.83 and you think its worth $25 or more. In other words, FFH gave up deal value on the FBK side but is gaining it back on the ABH side. Remember, when all this started FBK was potentially on the verge of doing an acquisition which would have been diluted; FBK was at $.70; pulp prices were weaking; and FBK management was not shopping the assets to competitors to maximize shareholder value. In order for ABH to agree to doing the deal they required the hard lock agreement to protect themselves. At the time, given the choice of the hard lock agreement vs. FBK's prospects under current management, I suspect they decided they had enough. This deal hurts the minority shareholder of FBK who doesn't want to own ABH going forward. I believe those are likely the biggest voices at this time. They are getting lessthan IV for FBK which pisses them off and they won't accrue the gains back through ownership of ABH. But ... that's business. Frankly, I don't understand a lot of comments regarding FFH. Their loyalty lies with their own shareholders first.

TTT, As I mentioned in my last post, I'm not yet convinced the warrants will be allowed. Possibly, but it's not a done deal by any stretch. The precedent cases cited earlier are instructive. The private placement in the Hudbay deal was squashed because it was deemed to be abusive. The Paramount deal was found to be a real financing and the panel did not intervene. In that issue the financing was not bathing in "conditions". My understanding is that money was available to the company regardless of the outcome of the deal. In this case, FBK's deal structure looks a little more suspect to me and I'm not sure whether the BDR will see it as such. The reason for my concern is that funds are heavily conditional and the funds are currently in trust (not available to the company). The outcome of the warrants will be influenced by the outcome of ABH's offer. Will the BDR see this as a real financing? I'm really not sure. ABH will argue that the warrants are abusive. Here's why; If ABH came to the table with a $1.30 offer tomorrow to match Mercers under the assumption that this was indeed a better deal because ABH paper is worth more they still would not likely get a deal done. Assume for a minute that ABH stock is more valuable. This is a complete grey area but that's my point. Under these conditions ABH would not likely get the Boards support. The Board must be convinced that ABH has offered a superior deal and there is way too many variable involved to confidently determine who's paper is better. Therefore, it would cost ABH $40M even if they did indeed have a superior offer and under this scenario it will therefore cost the other shareholders. If on the other hand, ABH comes in with a new offer at $1.45/share. It would be hard for the Board to not see that as a superior offer, imo. Remember, Fibrek has the right to redeem the warrants if it supports a superior proposal. So, the money could flow out of trust to buy back the warrants. Is that a true financing or more of a strategic tatic to force ABH to come to the table with a materially higher bid? We'll see what the BDR/ TSX say .... Re your question: FFH wants the excess value within FBK to accrue to the largest shareholders of ABH, which is of course -FFH. <IV

I'm not so quick to conclude that FBK will be allowed to do the warrants. The regulators will want to know that the issue was truly needed for corporate reasons and not just as an anti-takeover tactic. Given that the funds have gone to escrow and would likely be redeemed should Mercer win their bid the courts may side with ABH. Fibrek went to great lengths to state the purpose of their issue in the press release but I'm not so sure the courts (or exchange) will approve. Fibrek is trying to force ABH to come with a bigger bid and should they turn the offer friendly the warrants can be redeemed. Not sure that is going to fly ... From the release: Mercer has also agreed to purchase 32.32 million special warrants of Fibrek on a private placement basis, at a price of $1 per special warrant for total subscription proceeds of $32.32-million. The special warrants are convertible into common shares of Fibrek on a one-for-one basis. Conversion of the special warrants is automatic in certain events and otherwise at the option of Mercer subject to certain conditions. The special warrants are also redeemable by Mercer or Fibrek in certain events at their subscription price, including in the event that Fibrek receives and supports a superior proposal. The proceeds of the private placement will be deposited in trust at closing and will be releasable to Fibrek on conversion of the special warrants or to Mercer in the event of a redemption. Proceeds from the private placement are initially to be used by Fibrek to reduce net debt given (i) the recent costs associated with its strategic alternatives review process in response to Abitibi's unsolicited offer, (ii) the high level of RBK pulp inventories and lower than anticipated sales which have resulted in a five-week market shutdown of the Fairmont mill effective Feb. 20, 2012, and an increased need for liquidity, and (iii) capital expenditures required in connection with Fibrek's power-generation initiatives and other growth and diversification opportunities. Completion of the private placement and the conversion of the special warrants is subject to a number of conditions, including the approval of the Toronto Stock Exchange, but is not conditional on the successful completion of the Mercer offer. In the event the Mercer offer is not completed, the private placement will provide Fibrek with necessary financing to continue operations and the execution of its strategic plan

How is this clown "seeking alpha certified". Time to start the letter writing campaign on behalf of Francis.

278K - voted against.

http://www.forbes.com/sites/jamesmarshallcrotty/2011/12/21/m-i-t-game-changer-free-online-education-for-all/

Yes the lockup group put FBK into play for a reason, but unfortunately not the reason you are claiming. As I said before, they put FBK into play to allow all the intrinsic value + synergies to accrue to themselves through ABH, at the detriment of FBK minority shareholders. Otherwise, they would have signed soft lock-ups. EXACTLY, unless you take ABH stock and go along for the ride.

None of this addresses the simple question; "Why would ABH compete with themselves?" With so many shares comitted to the deal at $1, the hurdle to overcome in terms of additional votes is pretty low. They only require 4 out of every 10 shares remaining to vote in their favor. Naturally, FBK will come back with a higher valuation. But, that doesn't mean ABH will do anything about it. Why not just take the $1 offer to vote. If they get it they've stole the assets. If they don't they can simply extend the offer provide a small bump and get wait the obigatory 10 days to find out if they are lucky the second time around. Quebec Harvest levels are shrinking and FBK's biggest expense comes from ABH in the form of woodchips. Porter's 5 forces: I think ABH has the power, unfortunately. I don't like ... but I fear this is reality. I hope your right and I'm wrong ...

This is what I previously mentioned looked to be the motive for FFH. ABH looks to be worth about $25/share. Valued in the deal at $15.84 giving about 58% upside. The FBK deals kills the guy who wants cash but rewards the investor who adopts ABH, imo. Synergies gained are in addition. Effective value is then $1.58/share and your betting that ABH gets to it's fair value before FBK could. I personally, don't disagree with this ... My simple answer to all the math occuring in the previous thread is ... "why would FFH want to compete with themselves". FBK and their bankers can frame the value anyway they want. But I highly doubt ABH will up the offer until after the vote. They only need to get 20% more. If they don't, they can extend the offer with a slightly improved price, wait 10 days and find out if that was enough to attract the extra 20%. I personally don't see how the offer comes to $2/share at any point. Don't get me wrong, I'd be happy if it did... but I think those folks are focusing on the cash value only and no looking into the value on the ABH side. ;D

We adopt a Christmas family every year too. This year, a single Mom and her two kids. Working hard trying to provide for the kids and get herself stabilized after a bad relationship. My two boys even donated their December allowance and bought gift cards at Walmart for the other kids. Clearly they are getting as much out of this as the sponsored family! Last week when I was going through the Tim Horton's drive through I saw a young Cadet raising some money by the front door. I yelled for him to come over and I donated $20 bucks. When I got to the window to pay for my stuff the girl informed me that is was all taken care of by the guy in front of me and that he wished me a "Merry Christmas". What comes around goes around. <IV

http://www.cnbc.com/id/45463910

66% total but Prem and Mohnish represent about 46% of that... so really out of the remaing shares, only 40% has to accept the offer. (see my math above)

Are you thinking the assets may generate more interest if they are split up and sold off in pieces?

Rmitz, Respectfully, I think the remaining float is owned by many investors who bought this company longer ago than the year and half you mention. Many investors purchased SFK back in 2005/2006 when Fairfax was building their position. Incidentally, judging by the decision to lock up their shares at this price ... I can only assume that Prem and Mohnish have become "very tired" too.

The problem as I see it is ... There isn't going to be any competition for the assets to drive the price higher. What other Eastern operators are in a position to bid? I'm assuming you expect the board to reject this offer and then Resolute counter at $1.45 but I'd be surprised to see that high of a counter. With 130M shares extended and 59M already committed, 46% of the required 66% has already been attained. That means that of the remaining 71M shares only 28M (or roughly 40%) need to tender to complete the bid. In this market with other opportunities abound, I expect that a good chunk of very tired shareholders are going to take the 39% premium and reallocate the cash. My gut feeling is that ABH steals these assets. If Prem and Mohnish take ABH stock they now have "their guy" running the show and as I mentioned previously, it appears to my eye that ABH stock is itself quite undervalued. (need to do more work here). But it's likely that their confidence in ABH passing them back that value is greater than their confidence in FBK passing them back that value. That's the only reason I can see for the signing the lock up agreement at this price. Perhaps it takes a slightly higher bid but I don't expect a huge improvement.

I find the price of ABH interesting. Upon an initial cursory glance, the value of ABH seems much higher than $15.84/share. The value appears closer to mid twenties. Roughly a 58% upside to get to $25/share. Fairfax and Pabrai likely have more confidence in ABH returning to IV sooner that FBK could. Having ABH return to fair value would be the rough equivalent of getting $1.58/share for FBK. FBK is heading into some headwinds at the moment on pulp pricing. The deal seems to be valued around 4X a reasonable estimate of EV/2012e EBITDA . That's perhaps a little too cheap but in the vicinity of proper multiples for a single product pulp company. Most seem to garner multiples of 4.5X to 5X EV/EBITDA.

Fibrek suitor Resolute plans $130-million takeover 2011-11-28 19:43 ET - News Release Mr. Remi Lalonde reports RESOLUTE FOREST PRODUCTS TO COMMENCE TAKE-OVER BID TO ACQUIRE FIBREK INC. Resolute Forest Products intends will make a formal takeover bid to acquire all of the issued and outstanding common shares of Fibrek Inc. "The acquisition of Fibrek is consistent with our strategy," stated Richard Garneau, president and chief executive officer. "As we continue to focus on building a sustainable and profitable company, growth in expanding global pulp markets is the right move, at the right time, for Resolute Forest Products. The range of optimization opportunities that we expect from this acquisition will, over time, deliver increased value to our shareholders." The offer would contemplate that holders of Fibrek shares could elect to receive for each Fibrek share: Cash and share option: 55 cents in cash and 0.0284 of a Resolute share; Cash only option: $1 in cash (subject to proration, as described herein); Shares only option: 0.0632 of a Resolute share (subject to proration, as described herein). The maximum amount of cash available will be approximately $71.5-million, and the maximum number of Resolute shares to be issued will be approximately 3.7 million shares. For purposes of calculating the applicable proration, the maximum cash available and the maximum shares available will first be reduced by the amounts necessary to satisfy the cash and share option fully. The cash only option and the shares only option will each be subject to proration in the event aggregate elections exceed the remaining cash or the remaining shares, respectively. If proration applies, the remaining consideration will be delivered in Resolute shares if the cash only option is prorated or in cash if the shares only option is prorated. The offer will contain customary conditions for transactions of similar nature, including, among others, a 66-per-cent minimum tender condition, waiver or termination of all rights under any shareholder rights plan(s), receipt of all regulatory, governmental and third-party approvals, consents and waivers, Fibrek not having implemented or approved any issuance of shares or other securities or any other transaction, acquisition, disposition, capital expenditure or distribution to its shareholders outside the ordinary course of business, and the absence of occurrence or existence of any material adverse effect or material adverse change. Resolute has entered into lock-up agreements with three significant shareholders of Fibrek, including Fairfax Financial Holdings Ltd. and Pabrai Investment Funds, holding, directly or indirectly, an aggregate of 59,502,822 Fibrek shares (representing approximately 46 per cent of Fibrek's issued and outstanding common shares). Under the lock-up agreements, each of the locked-up shareholders has agreed to tender, or cause to be tendered, all of its Fibrek common shares to Resolute's offer, subject to certain conditions. The lock-up agreements provide, among other provisions, that Resolute commence a formal takeover bid on or before Dec. 30, 2011, provided certain conditions are satisfied, including there not having occurred any material adverse change with respect to either Resolute or Fibrek. Under the lock-up agreements, which are being filed with the U.S. Securities and Exchange Commission, also available on the Canadian SEDAR filing system, the locked-up shareholders have no ability to withdraw any Fibrek common shares to tender to or facilitate any competing transaction. The offer represents a premium of approximately 39 per cent over the closing price of Fibrek's shares on Nov. 28, 2011, and a premium of approximately 31 per cent over the volume-weighted average trading price of the shares on the Toronto Stock Exchange for the 20 trading days ending on that date. Full details of the offer will be included in the formal offer and the takeover bid circular to be filed with the securities regulatory authorities and mailed to Fibrek shareholders. Based on Fibrek's public disclosure, it has 130,075,556 issued and outstanding common shares (on a non-diluted basis), valuing the offer at approximately $130-million, or approximately $126-million (U.S.). Resolute currently owns no Fibrek common shares. BMO Capital Markets is acting as financial adviser to Resolute, while UBS is acting as financial adviser to a special independent committee of the board of Resolute. We seek Safe Harbor.

SD, Most folks, including their largest shareholder have been holding for much longer than 3 years and will likely lose money with an IV of $2.50.

Given the 2007-2011 market climate, I'm pretty happy. (I'm leveraged) Years Return (%) YTD Aug11 7.62 1 Year -11.17 2 Years 23.35 3 Years 25.03 4 Years 28.01