A stock photo of a corporate boardroom.Arpad Benedek/Getty Images/iStockphoto
The shareholders have spoken at Tuckamore Capital Management Inc., and the company's leaders have given up on a management-led buyout. But management's new plan for recapitalizing the firm isn't sitting much better than the old one with dissident investors.
Tuckamore's management sought to privatize the company in a 75-cent-a-share in a partnership with private equity firm Birch Hill. The aim was to use the Birch Hill capital to refinance senior debt and grow its businesses away from public scrutiny. When Tuckamore was challenged by a group of shareholders who demanded a higher price, the company changed tactics.
On Friday, the company unveiled a new strategic partner in Orange Capital LLC, a New York-based investment fund with a history of activism. Orange led a proxy fight at InnVest, went head-to-head with Partners REIT and is currently working on the restructuring of Calgary-based oil company Newalta Corp.
Orange Capital would bring some of that oil and gas industry experience to Tuckamore, whose portfolio of seven businesses includes oilfeild services firm ClearStream Energy Services. More importantly, Orange would bring a proposed $12.5-million investment in exchange for a 17 per cent stake in the business at a price of no less than 75 cents per share. Tuckamore intends to use the funds to reduce its debts. Orange would also get to nominate a director and an observer to the board.
Orange, run by portfolio manager Daniel Lewis, is bound to an 18-month ban on owning 20 per cent or more of the company's shares, and though aligned with management's interests, the firm isn't guaranteed to vote their way.
The TSX gave the private placement the green light, on the condition that Orange Capital not vote its shares for any takeover bids involving Birch Hill Equity Partners or company management for at least a year without seeking approval from the TSX.
To show shareholders it is taking governance concerns seriously, Tuckamore hired executive and board search firm, Tom Long Consulting Inc., to find new board members.
But Access Holdings Management Co., one of Tuckamore's most vocal opponents, made it immediately clear it wasn't in favour of the deal that tied the company to a "management-friendly party without testing the market." And it thinks it can make a better offer.
By Monday, Access had formed a consortium with First Series of Halcyon Trading Fund LLC and proposed a new deal that excludes Orange's participation. The shareholder group has improved on the price offered by Orange, putting forward $12.5-million in exchange for fewer common shares at a price of 80 cents each. At this price, fewer shares would need to be issued, and shareholders' existing holdings would be less diluted than under Orange's offer. The consortium said that the shares are worth much more than 75 cents each, and is content to accept less equity as a result.
The consortium said its offer is better than Tuckamore's proposal because it will allow more shareholders to get involved through a rights offering, and that it will cut down on restructuring and other fees.
Access said in a release that it would have liked the opportunity to discuss a potential investment in Tuckamore before the company reached out to outsiders.
It will now be up to Tuckamore's board to review the offer from Access.