Talk America (NDAQ:TALK) revealed today in a
13D filing with the SEC that Sun Capital - a 13.9% owner of the company - offered to buy the company's outstanding shares. This comes one day after another majority holder complained about Cavalier's bid being too low.
According to the filing:
"The Reporting Persons delivered today to the Board of Directors of the Company a letter proposing to acquire in an all-cash merger transaction all outstanding shares of Common Stock at $9.00 per share, subject to completion of confirmatory due diligence for a maximum period of 30 days (the 'Proposal Letter')."
In the attached letter, the company gave a comprehensive overview of their bid:
"All-Cash Consideration. Sun Capital proposes to purchase for cash all of the outstanding shares of Company Common Stock for $9.00 per share (based on the Company’s public filings which reflect approximately 31.1 million shares of Common Stock outstanding on a fully diluted basis using the treasury method). As stated above, we propose that the transaction be structured as a single-step merger (although we remain flexible with respect to transaction structure to the extent an alternative structure is feasible and in the best interests of the Company’s stockholders). Our proposal represents an approximately 11% premium to the pending Common Stock Consideration.
No Financing Contingency. Equity financing for this transaction will be provided by one or more of Sun Capital’s affiliated funds (“Funds”). As stated above, with more than $3.5 billion in capital presently under management and the ability to invest over $800 million in any single transaction, Sun Capital currently does not need to nor does it intend to partner (or “club”) with any other equity financing sources or co-investors with respect to this transaction. Financing for the proposed transaction (including all fees and expenses) would be fully committed by Sun Capital and affiliated funds at the date definitive transaction documentation is executed by the Company.
Due Diligence. Upon execution of a confidentiality agreement, Sun Capital’s confirmatory due diligence would need to be completed to Sun Capital’s satisfaction. Such due diligence would include meetings with management and outside auditors, and a review of the Company’s books, records and legal documents by Sun Capital and its professional advisory team. Such confirmatory due diligence would be completed in a maximum period of 30 days and definitive documentation would be completed in tandem with that time frame.
Management. It is Sun Capital’s current preference and intention to retain incumbent senior and middle management who desire to remain with the Company and join our team. It is our intention to offer appropriate cash and/or equity incentive compensation, and to provide appropriate retention programs and welfare benefits.
Execution Speed. Sun Capital and its professional advisors are prepared to commence due diligence immediately following execution with the Company of a confidentiality agreement. Immediately thereafter, Sun Capital would begin good faith discussions and negotiations with the Company and the Board and definitive transaction documentation would be prepared and finalized contemporaneously.
No Regulatory Delays. As a U.S.-based private equity firm with no foreign control persons, we do not anticipate any delays in obtaining requisite regulatory approvals for the proposed transaction, including HSR, FCC and state commission licenses. Sun Capital will work collaboratively with the Company to obtain such approvals, including making all necessary filings immediately following the signing of a definitive transaction agreement. Subject to other customary closing conditions, we would anticipate closing a transaction as promptly as possible."
The bid represents an 11% premium over the previous bid by Cavalier Telephone Corp., which drew crticism from investors for being too low at only $8.10 per share. Investors are now speculating as to whether Cavalier will start a bidding war by upping Sun's bid. It is worth noting that the company traded as high as $10 earlier this year, which means that some large investors responsible for making these decisions may still be underwater. Fundamentally, however, the company is trading significantly above its enterprise value with a forward PE of over 80x. So, whether a bidding war happens or not remains to be seen; however, this is definitely a stock to
keep an eye on.
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