Stratos International (NDAQ:STLW) announced today in a press release that the company would be exploring strategic alternatives, which could include a possible sale of the company. The company also said that it had retained CBIC World Markets Corp as its exclusive advisor. The story becomes interesting when we see that activist hedge fund Steel Partners is a majority holder, holding almost 15% of the company.
The company noted in its press release that:
"Steel Partners II, which issued a press release in June
indicating that Steel Partners might be willing under some circumstances to
make an offer for Stratos, would be welcome to participate in the process."
So, what was this offer? Well, if we look back to their June
13D/A filing with the SEC, we can see the following:
"We believe we have exhausted all our efforts to privately discuss with the Board of Directors a value enhancing transaction in any meaningful way. Accordingly, Steel Partners II, L.P. publicly sets forth its willingness to offer to acquire all of the common stock of Stratos it does not already own, through one of its affiliates or other appropriate acquisition entity by merger or otherwise, for $7.50 per share in cash (the "Transaction"). Our proposal is not subject to any financing contingency. This represents a substantial 23% premium to the current market price of $6.09 per share. We believe this all-cash offer will provide shareholders immediate liquidity and an immediate opportunity to maximize their investment in the Company. We urge the Board to allow the Company's shareholders to have the opportunity to decide whether to accept our proposal.
We propose that the Transaction be accomplished through a definitive tender offer/merger agreement. Our proposal is conditioned upon satisfactory completion of due diligence typical for a transaction of this type (our familiarity with the Company should enable us to complete all required due diligence on an expedited basis), obtaining all necessary consents and approvals, waiver of any Company anti-takeover provisions including the Company's shareholder rights plan, other customary conditions for a transaction of this type and size and the execution of a definitive agreement.
If as a result of our due diligence we find evidence of additional value inherent in the Company based on operating results or otherwise, we would be willing to upwardly adjust the offer price to reflect such additional value. We invite the Board to share with us any documentation in the Board's possession which it believes reflects additional value in the shares that it believes is not already known to us."
The stock is up 10% on the news, now trading at $6.70 - which is still a substancial discount to Steel Partners' offer of at least $7.50 per share. With such a large existing stake in the company, the hedge fund would be acquiring the rest of the company for cheaper than any other potential bidders. Whether or not additional bidders will show up remains to be seen; however, from what we know now, STLW appears to be trading at a steep discount to Steel Parters' June offer, and may be a buying opportunity even at these levels. Either way, it's a great stock to
keep an eye on as the process of finding strategic alternatives begins...
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