Angelica Corporation
(NYSE:AGL) may face more heat from Pirate Capital's Thomas Hudson after
the activist hedge fund disclosed a 9.8% stake and expressed strong
disappointment with the company's operating results. The Chesterfield,
MO-based company recently posted a first quarter loss of $1.14 million
on revenues of $107.8 million compared to a loss of $1.5 million on
$107 million during the same period last year.
The largest
concern that many shareholders have is the disconnect between the
intrinsic value of the company and the current market valuation of its
shares. Specifically, many are concerned that the aggregate price of
Angelica's 11 bolt-on acquisitions between 2003 and 2006 is
substantially higher than the value that the market currently assigns
to these assets. The company ended up paying 1x sales while the company
remains valued at just 0.5x sales. Clearly this is a problem with
either the market's mis-valuation or management's recklessness.
Pirate
Capital is a well-known activist hedge fund but had some troubles in
the past when lackluster returns led to multiple limited partners
pulling their money out of the fund. The hedge fund is now trying to
turn itself around, however, amid a healthy M&A market that has
seen more deals than ever before. While Pirate Capital never indicated
that they were specifically seeking a sale, the hedge fund did say that
they would actively pursue strategic alternatives. Combined, these
factors make AGL a stock
worth watching!
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