Resolute Forest Products Commences Takeover bid of Fibrek

[triedtestedand]

I guess I'll answer my own question with this clarifying press release from FBK (presuming it's not an April Fool's joke):

 

http://www.stockhouse.com/News/CanadianReleasesDetail.aspx?n=8467414

 

 

I'm just reminding myself that at Feb. 10th, when Mercer's offer was first announced, ABH had 52% of the vote (which included Steelhead), and it's only gone down since, so unless other shareholders change their minds and now tender to ABH, then the MERC offer has opportunity to proceed without more ugly/costly/damning court time, no?

 

Wow ... the backstory on this must be a better fodder than any wood chip supplier can produce ... forget the Harvard business review, and get a hard lock-up on the screenplay rights. ;-)

 

[Guest Quebec]

An eventful week-end!

 

Thank you Steelhead, in my mind, it does clean Your act.

 

Let's hope that no new shenanigan comes out and we get that 1.50 Prem price!

 

Can another large shareholder come out and tender to ABH ? That is the risk because small ones can exi at a premium for a long time now. Chou funds have a sizable stake in ABH and some FBk but thank god they stayed out of this mess.

 

Anyone understands Mohnish motivation? He doesn't have AbH afaik and cost basis around 0.99 ?

[SharperDingaan]

We highly doubt that ABH will cut bait.

 

ABH has little choice now but to put up a better bid that includes something for the PPA - or add a significant economic loss from their chip plant (i.e. Mercer refuses that plants production untill they renegotiate the price) to their existing costs. The lock up group also has a fiduciary duty to their shareholders to push ABH, & maximize the value of their FBK holdings.

 

If they have any strategic sense at all, they will not try to cheap out this time.

 

SD 

[triedtestedand]

ABH are not cutting bait, just cutting their tender condition again:

 

  http://www.stockhouse.com/News/CanadianReleasesDetail.aspx?n=8467436

 

This just seems like death by a thousand cuts.  The question is ... is Steelhead just playing legal games, or what?

 

[alertmeipp]

for 1 buck, they can get FFH and friends' shares - not mine.

[lessthaniv]

We highly doubt that ABH will cut bait.

 

ABH has little choice now but to put up a better bid that includes something for the PPA - or add a significant economic loss from their chip plant (i.e. Mercer refuses that plants production untill they renegotiate the price) to their existing costs. The lock up group also has a fiduciary duty to their shareholders to push ABH, & maximize the value of their FBK holdings.

 

If they have any strategic sense at all, they will not try to cheap out this time.

 

SD

 

SD, we must have two very different sets of glasses we're wearing.

 

If Steelhead is publicly saying they won't tender until the minimum condition is met, that probably means they are worried about the Quebec securities commission hearing on Monday. ABH has now dropped the minimum tender to be less than the amount of shares they currently have locked up.

 

The outcome here is not that hard to figure out. It really never was.

 

I think your perspective is blurred.

 

 

 

[Guest Quebec]

"until the minimum tender condition contained in the Resolute offer (as it may be amended) has been met."

 

From this excerpt of the PR, they were anticipating a revision to the minimum tender. It looks like it was just intended to fool and try to save them from the regulator scrutiny.

 

It's such a lousy offer when no one but the offeror crowd tenders...

[alertmeipp]

I am trying to what's the point, 45% is not majority. For fairfax and friends, is it really better off for them??

[Guest Quebec]

The point is that is just a little detour for them to bypass regulator troubles. I hope they fall into a trap because we can all see the joint actors helping each others to force an unfair transaction for their benefit as owners of the acquirer, even i the face of a better offer. I guess hard lock-ups are permitted to help the emergence of bids, but they are wrong when they are performed by insiders of the acquirer, such as Fairfax. The transaction should be ruled to required majority of the minority and a fair price evaluation. If this works for abh, it can become a blueprint for minority abuse takeover

[SharperDingaan]

lessthaniv: we think our glasses just see further out.

 

There is only one reason for lowering the threshold, & Steelheads dissassociation. ABH must have a hurdle (related to the lock-up agreement?) tied to a 2nd stage offer - they aren't trying for majority at this point; just a formal vote that their offer has been accepted - & the lock-up group will give them that. At only $1.00, no one unrelated is going to vote for this.

 

A 2nd stage offer will be a new ballgame, & the firmer PPA & Mercers competing offer will be up front parts of the equation. Maybe this time they'll bring the real "A" team, & leave the ego behind.

 

Folks are happy to sell but they will get paid for it. Most would also expect a 'peace' premium for putting up with the abusive BS over the last 5 months.

 

 

[link01]

I am trying to what's the point, 45% is not majority. For fairfax and friends, is it really better off for them??

 

well, maybe abh & co are willing to buy at 1 & happy to sell more shares at 1+?

[tyska]

Has anyone ever heard of this before. I know I haven't, but then I'm not near as knowledgeable as most on this board. A takeover bid for less than 50%.

[lessthaniv]

lessthaniv: we think our glasses just see further out.

 

There is only one reason for lowering the threshold, & Steelheads dissassociation. ABH must have a hurdle (related to the lock-up agreement?) tied to a 2nd stage offer - they aren't trying for majority at this point; just a formal vote that their offer has been accepted - & the lock-up group will give them that. At only $1.00, no one unrelated is going to vote for this.

 

A 2nd stage offer will be a new ballgame, & the firmer PPA & Mercers competing offer will be up front parts of the equation. Maybe this time they'll bring the real "A" team, & leave the ego behind.

 

Folks are happy to sell but they will get paid for it. Most would also expect a 'peace' premium for putting up with the abusive BS over the last 5 months.

 

 

Yes, I agree this is possible but at this stage I just don't carry much faith.

 

Steelhead is clearly on the ABH side of the deal as dictated by their actions thus far. I think they got worried about the security commission hearing. I guess we agree that ABH will now take up the minority position. Steelheads actions are the key. If they tender to the ABH deal after the minimum tender offer, ABH will become a majority shareholder. A stage 2 offer would not likely come at a higher price because the Mercer offer is dead at that point. If Steelhead doesn't tender to ABH then I suspect ABH may have to come to the table with a higher number but given that Steelhead is clearly on the ABH side of this deal ....

 

I guess we'll find out shortly.

 

This is the language that concerns me:

 

BELLEVUE, WA, March 31, 2012 /CNW/ - Steelhead Partners, LLC ("Steelhead") announced today that it has reserved its decision whether or not to tender shares of Fibrek, Inc. ("Fibrek") held by Steelhead Navigator Master, L.P. ("Steelhead Navigator") to the offer made by AbitibiBowater, Inc. doing business as Resolute Forest Products ("Resolute")  until the minimum tender condition contained in the Resolute offer (as it may be amended) has been met.  Steelhead has not yet made any decision or commitment to tender Steelhead Navigator's Fibrek shares to the Resolute offer should such condition be satisfied.  Steelhead has not currently tendered Steelhead Navigator's shares to either the Resolute offer or to the competing offer of Mercer International Inc. ("Mercer").

 

Both Steelhead and Steelhead Navigator are independent parties in this matter.  Steelhead Navigator is a shareholder of each of Fibrek, Mercer and Resolute.  Steelhead's only goal has been to support the offer which creates the greatest possible value for Steelhead Navigator's investment.  In evaluating any tender offer, Steelhead seeks to look past the cash price. Instead, Steelhead carefully examines the overall package of consideration offered and focuses on the potential synergies that will be created by the combined companies as the true drivers of long-term value.  Steelhead expects that such an offer will have the support of a significant majority of Fibrek shareholders and will ultimately be successful.

 

Steelhead Navigator holds 6,479,000 common shares of Fibrek, representing 4.98% of the outstanding shares.  Steelhead Navigator's weighted average acquisition cost of its Fibrek common shares is $0.993 per share.  Steelhead Navigator's weighted average acquisition cost for Fibrek common shares purchased subsequent to the announcement of the Resolute offer is $0.991 per share and the highest price paid was $1.02 per share.

[Guest Quebec]

Secret hearing ?

 

http://www.canada.com/nationalpost/financialpost/story.html?id=706cb6ea-5950-424a-b78a-39978cad4115

 

Will the Quebec regulators see it this time ?

[gordoffh]

Who would have thought our little company would generate such shennaigans. Secret meetings, insider dealings,court involvement. You would think we were some multi national conglomerate. There must be quite the story behind all this and perhaps we will be privy to all someday.The cost for all this must be adding up. perhaps worth a lot more than 1.30

[cwericb]

As I was writing this I see that gordoffh had just posted something similar...

 

The word that comes to mind to describe this mess is "bizarre”. It seems that every second day that I pick up my mail there are a couple large envelopes sitting there from one side or the other.

 

Out of curiosity, does anyone have a count on the mailings we have received to date? I have gotten to the point where I don’t even open them anymore. The useless expense involved in these mailings alone must be horrendous. I guess it will all come out when someone writes a book about this.

[alertmeipp]

Same problem here, if u hold shares across multiple accounts, u will be flooded with those big envelops.

 

Good for pulp market.

[SharperDingaan]

Secret meetings are rare, but not that unusual.

Almost always it is either to read the riot act & break skulls, or inform (not discuss) as to what you are going to do next (i.e. US Fed/BOC calls all the nations bank chairmen to a meeting, & tells ...)

 

Suspect there was some of both. ABH tried to exploit regulatory arbitrage, made both regulators look bad, & there is a PPA in play; not appreciated. They may then have 'agreed' to next steps; probably a precedent setting 2nd stage bid where they do not have majority.

 

Most would think this is definately not what the lock-up group signed up for. 

 

 

 

 

 

[cwericb]

When this all settles out, doesn’t it simply come down to a battle between Fairfax and the board of Fibrek?

 

Initially it appeared to be a good idea to amalgamate and streamline the operations of ABH and FBK and take advantage of the FBK’s low share price. But the bid just simply didn’t fly because somebody thought they could get away with getting FBK on the cheap.

 

But then this seemed to degenerate into an ego trip and everyone dug in their heels. Ever since, both sides have been frittering their shareholders money on what is probably a personal battle.

 

Tere is one common factor in this battle - Fairfax. And yes business is business, but at some point Fairfax should have realized that (theoretically) they hold themselves to a higher standard and therefore they should have made a more reasonable offer rather than try to force an unreasonable offer through by any means available.

 

Look. when one faction offers shareholders $1.00 and the other offers $1.30, nearly everyone looking at this can see who the good guys and bad guys are.

 

Fairfax has to be embarrassed over the bad press they have received over this already so why haven’t they done something about it? While others can participate in this sorts of wars, how do you possibly justify it when you derive your name from your motto of “Fair and Friendly Acquisitions” ?

 

Does anyone suppose that Perm will be inviting FBK’s people to the annual dinner this year?

[lessthaniv]

Look. when one faction offers shareholders $1.00 and the other offers $1.30, nearly everyone looking at this can see who the good guys and bad guys are.

 

Not necessarily - both sides have limited the cash available under their tender offers to roughly $70M. Therefore, it becomes necessary to value their paper to determine which one is the best option.

 

Not taking sides ... but the nominal offer price doesn't always direct you to the best place.

 

 

[alertmeipp]

All I want is we can actually choose which one to go with.

With the BS lock-up, I feel like I might lose that option.

[lessthaniv]

All I want is we can actually choose which one to go with.

With the BS lock-up, I feel like I might lose that option.

 

You can choose which offer you want to go with. But other shareholders are entitled to those same rights. Contrary to the tone of this thread, FFH, Pabrai, Oakmont etc are well within their rights to lock up shares to an offer. Remember the Mercer offer didn't exist when they made that commitment and the stock price was around $.70.They voted their shares in a manner that they believed gave them the best opportunity for success at the time.

 

I think too many invested in FBK because they were riding the coattail of FFH. And, now they are caught. I have a problem with blaming FFH for that.

 

 

 

[alertmeipp]

well well well, let's be fair. I don't have ABH so my interest is not aligned with FFH here.

[triedtestedand]

<IV:

 

"I think too many invested in FBK because they were riding the coattail of FFH. And, now they are caught. I have a problem with blaming FFH for that. "

 

That sounds good, and has some truth to it ... but there are 130M shares outstanding, and FFH owns <30% of those, so others HAVE to own the rest ... and it doesn't change any of the events that have transpired over the past few months.  Further, if you want to see who's been riding coattail to FFH and is really caught the most, ironically I'd actually look at Oakmont and Pabrai.  I still wonder most about what they are thinking, what they knew (or didn't know), etc. ...

 

Also, agree as well that the $1 vs $1.30 is not quite so straightforward when factor in the share portions.  To that, there's also the argument of liquidity (ABH being bigger/more liquid).  And both MERC and ABH are somewhat equally down from their bid date valuations.  ABH's all-share option is currently worth ~$.87 and MERC's all-share option is currently worth ~$1.18.

 

 

[lessthaniv]

<IV:

 

"I think too many invested in FBK because they were riding the coattail of FFH. And, now they are caught. I have a problem with blaming FFH for that. "

 

That sounds good, and has some truth to it ... but there are 130M shares outstanding, and FFH owns <30% of those, so others HAVE to own the rest ... and it doesn't change any of the events that have transpired over the past few months.  Further, if you want to see who's been riding coattail to FFH and is really caught the most, ironically I'd actually look at Oakmont and Pabrai.  I still wonder most about what they are thinking, what they knew (or didn't know), etc. ...

 

Also, agree as well that the $1 vs $1.30 is not quite so straightforward when factor in the share portions.  To that, there's also the argument of liquidity (ABH being bigger/more liquid).  And both MERC and ABH are somewhat equally down from their bid date valuations.  ABH's all-share option is currently worth ~$.87 and MERC's all-share option is currently worth ~$1.18.

 

sent you a PM