Resolute Forest Products Commences Takeover bid of Fibrek

[tyska]

New information

http://finance.yahoo.com/news/Fibrek-oppose-AbitibiBowater-cnw-784331275.html?x=0

 

"Competition Bureau issued Supplementary Information Request to Abitibi making it highly unlikely that Abitibi will be able to proceed with its insider bid on January 20, 2012"

[alertmeipp]

We have 3539400 in total ~ about 2.8% of the outstanding.

I was hoping we have above ~%5.

[alertmeipp]

New information

http://finance.yahoo.com/news/Fibrek-oppose-AbitibiBowater-cnw-784331275.html?x=0

 

"Competition Bureau issued Supplementary Information Request to Abitibi making it highly unlikely that Abitibi will be able to proceed with its insider bid on January 20, 2012"

 

Mixed feeling on this. I want to sell but please give me a better price. $1 is an insult considered we all wait through out the deleverage and have NOT seen a dime going into our pocket.

[Alekbaylee]

130 K in different accounts. Will not tender either. If ABH/Resolute want my share, they'd have to make a compelling offer (i.e. way higher) not steal shareholders.  >:(

[alertmeipp]

Wow, I am surprised so many decided not to tender. It begs the question why our respected investors decided 46%..

 

Something doesn't make sense here.

[triedtestedand]

Alertmeipp:

 

Remember to add ~760K for FBK mgmt/board, and sub-total so far comes to ~4.4M.  In addition, I know of multiple entities (including our own positions) - all of whom are also not tendering - who's positions essentially double the sub-total above.

 

This brings the board total so far to almost 9M shares (or >6.5%), so it might get interesting ...

 

To your question ... I can only surmise that for FFH ... a) this is a small relative position, c) seeking to force liquidity event, c) they're selling (partially) to themselves, d) and they are backing Garneau, their selection to turn ABH around (which FFH has much more exposure to).  That said, I still can't understand why the others (i.e. Pabrai) would have played ball at that price - and under those conditions - as well ... except for similar reasons (e.g. small relative position; seeking liquidity/better options; wanting to force a liquidity event; wanting to play nice w FFH and/or ABH?)

[Daphne]

54K against.

[gordoffh]

40k  not tendering

[st96dgx8]

Alertmeipp:

 

Remember to add ~760K for FBK mgmt/board, and sub-total so far comes to ~4.4M.  In addition, I know of multiple entities (including our own positions) - all of whom are also not tendering - who's positions essentially double the sub-total above.

 

This brings the board total so far to almost 9M shares (or >6.5%), so it might get interesting ...

 

To your question ... I can only surmise that for FFH ... a) this is a small relative position, c) seeking to force liquidity event, c) they're selling (partially) to themselves, d) and they are backing Garneau, their selection to turn ABH around (which FFH has much more exposure to).  That said, I still can't understand why the others (i.e. Pabrai) would have played ball at that price - and under those conditions - as well ... except for similar reasons (e.g. small relative position; seeking liquidity/better options; wanting to force a liquidity event; wanting to play nice w FFH and/or ABH?)

 

 

I have at least 150K that will not be tendering plus significantly more if the fund purchases. If the new PPA is signed, intrinsic value is north of $2.50/share.

 

I believe that FFH, Pabrai and Oakmont tendered b'cos FBK was on the verge of making a dilutive equity financed acquistion. ALL THOSE OPPOSED TO THE TENDER SHOULD CONTACT FBK MGMT AND CONVEY THAT IF THE TENDER FAILS, FBK SHOULD RETURN >90% OF CASHFLOWS TO SHAREHOLDERS (VIA DIVIDENDS/BUYBACKS) AND/OR PAY DOWN DEBT.  FBK SHOULD NOT MAKE AN ACQUISITION WITHOUT SHAREHOLDER APPROVAL. Their acquisition track record and that of most management teams is abysmal

[alertmeipp]

 

ALL THOSE OPPOSED TO THE TENDER SHOULD CONTACT FBK MGMT AND CONVEY THAT IF THE TENDER FAILS, FBK SHOULD RETURN >90% OF CASHFLOWS TO SHAREHOLDERS (VIA DIVIDENDS/BUYBACKS) AND/OR PAY DOWN DEBT.  FBK SHOULD NOT MAKE AN ACQUISITION WITHOUT SHAREHOLDER APPROVAL. Their acquisition track record and that of most management teams is abysmal

 

Ditto. I just email the CFO with the message above.

 

Unless we are all "abnormal" here, I don't see the offer will go through.

[Cardboard]

Management needs to find a better deal or be fired. The old say: "Foul me once shame on you, foul me twice shame on me." applies very well. We cannot trust these people any longer. Garneau is right to say that all they have done so far is to bulk up their compensation package and to setup a poison pill. Before that they were looking to dilute your shares right at the bottom to make an "accretive" acquisition.

 

So no, calling these guys and telling me to turn the company in some type of income trust won't work. Not with them anyway! If they had done what you suggested we would not be there currently.

 

Cardboard

[alertmeipp]

If u look at ABH, doesn't seem like they have much better management there and some of their businesses suck.

 

with FBK, u can hope for a better pulp price. With ABH, I don't even know what they need to prosper.

 

[st96dgx8]

If u look at ABH, doesn't seem like they have much better management there and some of their businesses suck.

 

with FBK, u can hope for a better pulp price. With ABH, I don't even know what they need to prosper.

 

I concur. ABH's cash flow generation track record is terrible and a significant chunk of ABH shareholder equity, is in the form of intangible deferred tax assets that could be impaired in the next few years. 

 

That being said, FBK mgmt needs to be put on a tight(er) leash and we should put forth a proposal to be voted on at the AGM regarding the return of of cash to shareholders, if it comes to it.

[GrayFan]

I have 87k shares in various accounts and will not tender.

[Nnejad]

There's still a lot of disillusionment here people. Look at the following:

 

North American Softwood Pulp Markets Weak, Containerboard Stable

 

Jan. 19, 2012 - North American softwood pulp markets remain weak and hardwood pulp markets appear to be close to a bottom — January prices were flat month/month, say analysts at Deutsche Bank (DB).

 

U.S. NBSK (Northern Bleached Softwood Kraft) pulp fell $20/mton to $870/mton in January. Spot prices at $600-650/mton (-$25/mton month/month in January) remain well below list price levels. At current spot levels, prices appear to be at or below mill cash-cost levels.

.....

http://www.paperage.com/2012news/01_19_2012market_report_db.html

 

 

Taking YTD figures and annualizing them, you are optimistically looking at 60 million in EBITDA. Add 10 for the energy project, and you have $70 million EBITDA to work with.

 

Now, note the following:

Since the 2Q of 2012, list prices have fallen from $1025 to $870. Spot prices are much worse, but that's a 16% decline in prices for just list prices; That's 47 million in EBITDA lost (if you assume a similar 16% decline in FBK's realized price). Then you have $16 million in cap.ex, 10 million in interest expense, and nothing left in FCF.

 

And then weigh this analysis... Is this conservative? How could it be if we're not admitting that over the last 6 months, a significant amount of revenue has shifted towards spot prices, or that the RBK markets also got much, much worse. I don't think ABH would walk away, and so at $1.01 maybe there isn't a lot of risk... but I don't think ABH is going to raise its bid either, because in a few months this is going to look real ugly from a financial perspective.

 

[finetrader]

http://www.winnipegfreepress.com/business/breakingnews/fibrek-to-oppose-abitibibowaters-attempt-to-get-rid-of-takeover-defence-137725083.html

 

 

[Cardboard]

"North American Softwood Pulp Markets Weak..."

 

True, but look at European and Chinese markets at Paperage.com which is where I believe you found this article. Both are turning up and they are the big boys. NA will follow as usual.

 

So I think that Fibrek was right saying that ABH is making an opportunistic bid: low stock price and dip in the pulp cycle. Regarding the value of the assets, I would say that the NBSK mill has plenty of value even at these pulp prices. If Abitibi was not gouging them on the supply side, it would look closer to Canfor Pulp's operations. So if a big Quebec based player can come in with a better supply solution, they would make a lot of money.

 

The RBK side remains an issue as I have always said. Not sure at all what is the strategy to fix it and not sure what ABH would do with it. To me that this the portion of the business that needs to be sold to a larger entity that can use recycled pulp in its existing operations: reduce supply cost, sell more of it hence improving productivity.

 

Cardboard

[SharperDingaan]

This bid is about the best thing that could have happened for FBK shareholders - & kudos to ABH/FFH for putting it out there. Ignoring the price issue, from the business POV it has done what was really required.

 

It is clear that there is material friction between management & the major shareholders, & that the friction has become destructive. There is only room for one vision, & owners/managers have to be on the same page with respect to execution. Vertical integration to feed St Feliceon makes a lot of sense. Did buying additional tissue production elsewhere, for the right price, make MORE sense? – none of us really knows. We do know that it was value accretive, but it is difficult to see how it could have been done without significantly increasing either the financial &/or operating leverage of FBK.

 

Prior to the bid, FBK was entering an extended period of extreme return for the risk incurred. Financial leverage at record lows, base loading & new product rapidly dropping the operating leverage, & surplus CF & material share float available at a price well below IV.  The scuttlebutt would have it that the effect of buying additional tissue production, would have been the material & polar opposite of this.

 

From Day 1, FBK was not intended to be an empire. The mills were to be asset stripped on an ongoing basis with the material bulk of operating CF going back to trust holders. Depreciation less cap-ex to buy additional mills only if/when financial capacity & business opportunity presented itself. Repeal of the income trust legislation orphaned FBK; it was not sold off immediately as the market didn’t favour it. It was nursed through its near BK because the otherwise losses were punitive. It was retained through the last up-cycle because its Sharpe ratio was rapidly increasing for no additional capital investment. There have been material financial & operating improvements ...... but it remains an orphaned asset.       

 

There are now serious value-maximizing discussions, which we did not have before, & we have the best possible value maximizing means of resolving management/shareholder dissonance on FBK’s future direction. Our long-held view is that FBK should either be left “as-is” (baring a fibre acquisition), merged into another larger entity at market rate, or dissolved  - depending upon whichever  is most profitable. If it goes the “as-is” option,  merger &/or dissolution is just deferred to a later date.

 

Most would prefer a quick & clean resolution versus a drawn-out & messy affair .... & if it came with a minor discount, so be it (we don’t have to accept the offer). As in any auction there are times when it makes most sense to throw out your best bid, & this is one of them. A pre-emptive all stock bid in the $2.75-$3.25 range would very likely get it done, & done quickly.

 

SD

 

[alertmeipp]

>>A pre-emptive all stock bid in the $2.75-$3.25 range would very likely get it done, & done quickly.

 

We can only wish. I don't think it will come anywhere close to that.

[triedtestedand]

This just in ... deadline extended to Feb. 13th ... and only 57% have tendered ... not even 66.67% ... there's a message in that!

 

http://www.marketwatch.com/story/resolute-extending-offer-for-fibrek-to-february-13-2012-01-20-192400

 

 

[triedtestedand]

Let's expand on this a little bit:

 

74.25M (57.1%) have been tendered, of which we know:

 

-  59,502,8221 (46%)                (from FFH/Pabrai/etc. ... subject to lock-up)

-    4,336,500  (3.3%)                (from Steelhead ... as of Dec. 13th)

 

 

This means that a maximum of 10.4M shares (or 8% of total ... or only 15.7% of NON pre-aligned ABH stakeholders) have been tendered ... and even this assumes that Steelhead hasn't made any other open-market purchases subsequent to December 13th!

 

I was intrigued by the following quote from M. Garneau:  "We're pleased to see that over 57% of Fibrek shares have been tendered as of today. The success of our bid should be up to shareholders, unimpeded by management entrenchment maneuvers like the tactical poison pill."

 

Which begs the question ... why is M. Garneau so pleased? 

 

 

 

[alertmeipp]

wow.. probably lots of shares was withdrawn as the market recovers - no wonder the FBK management stop calling!

[SharperDingaan]

Purely speculation ... but with the vote over - perhaps the lock-up shares are now free? He may also be expecting a value maximizer to come to fruition (before the new deadline) which will remove the need for the poison pill.

 

SD

[alertmeipp]

Purely speculation ... but with the vote over - perhaps the lock-up shares are now free? He may also be expecting a value maximizer to come to fruition (before the new deadline) which will remove the need for the poison pill.

 

SD

 

Honestly, I am only hoping the ABH will just increase the bid, I am be happily gone with anything close to 2. I just worry FBK management will do more harm than good. 

[triedtestedand]

SD:

 

It appears that the lock-up is generally in effect until the offer expires (or 120 days?). 

 

 

Here's the document from the SEC:

 

http://sec.gov/Archives/edgar/data/1393066/000119312511323479/d261775dex101.htm

 

 

Relevant section is Article 4 (Termination):

 

This Agreement may be terminated by notice in writing as follows:

(a) at any time by mutual consent of the Seller and the Offeror;

(b) by the Seller, if the Offer is not commenced within the time contemplated by Subsection 1.1(b) or if the Offer has been terminated or withdrawn;

© by the Seller, provided the Seller is not in breach of any of its obligations hereunder, if the Offeror has not taken up and paid for Subject Shares deposited under the Offer within one hundred and twenty (120) days after the date of the Offer; provided, however, that if the Offeror’s take up and payment for Subject Shares deposited under the Offer is delayed by

          (i) an injunction or order made by a court or regulatory authority of competent jurisdiction, or

        (ii) the Offeror not having obtained any regulatory waiver, consent or approval or a delay in the declaration of effectiveness by the SEC with respect to the registration statement to be filed by the parent for the Parent Common Shares offered as consideration under the Offer, which are necessary to permit the Offeror to take up and pay for Subject Shares deposited under the Offer,  then, provided that such injunction or order is being contested or appealed or such regulatory waiver, consent or approval or declaration of effectiveness is being actively sought, as applicable, this Agreement shall not be terminated by the Seller pursuant to this 4.1© until the earlier of (i) one hundred and eighty (180) days after the date the Offer is commenced, and (ii) the 10th business day following the date on which such injunction or order ceases to be in effect or such waiver, consent or approval or declaration of effectiveness is obtained, as applicable;

(d) by the Seller, when not in material default in its performance of its obligations hereunder, at any time if the Offer is modified in a manner contrary to the terms of this Agreement or contrary to the provisions of applicable securities legislation;

(e) by either party, when not in material default in its performance of its obligations hereunder, if the other party has not complied with its covenants contained herein in all material respects;

(f) by either party, when not in material default in the performance of its obligations hereunder, if any of the representations and warranties of the other party contained herein is untrue or inaccurate in any material respect; or

(g) by the Offeror, if any Condition is not satisfied at the Expiry Time of the Offer and the Offeror has not elected to waive such condition.