Cossette Inc. said Friday a hostile takeover offer for the advertising agency is too low and it will seek alternatives from other possible bidders.
As part of a strategic review process, Cossette has asked its financial adviser to solicit proposals from third parties interested in buying the company.
“The board of directors and the special committee believe a public process with active solicitation of interest from a range of qualified parties is in the best interests of the company and its shareholders,” Cossette said in a statement.
Cosmos Capital, headed by a former Cossette president François Duffar and former Cossette vice-president Georges Morin, has offered $4.95 cash per share for Cossette.
“It now remains to be seen how successful Cossette will be in drumming up interest for the company at a level above $4.95/share,” said National Bank’s Adam Shine in a research note issued Monday. “We don’t know how high a future proposal will need to be to be deemed adequate by chairman/CEO Claude Lessard and the Board [of Cossette]. What we do know is the company’s results have not impressed of late and the backdrop of the dynamic triggered by Cosmos can’t be good for morale at Cossette as it struggles to complete a disappointing 2009.”
Also on Friday, Cosmos announced it has effectively acquired another 7.6% of Cossette after completing a lock-up agreement with Beutel, Goodman & Company Ltd.
Beutel, Goodman holds 1,266,091 subordinated voting shares in the agency network. With those shares added to its existing holdings–including those acquired through an earlier lock-up agreement with Burgundy Asset Management–Cosmos now controls about 37% of Cossette’s outstanding shares.
Cossette’s board has enacted a shareholder rights plan in a bid to thwart the hostile takeover, though it still needs approval from the TSX.
Cossette has said the plan is designed to prevent a creeping takeover of the company and preserve its ability to obtain the best value for all shareholders.
It includes the issuance of new subordinate voting shares available at half the prevailing market price, subject to approval by the securities regulator.
Today also marks the deadline set by Cosmos to be given access to Cossette’s books. Cosmos threatened to pull its offer off the table if it did not get to see the records. Based on the developments Friday, it seems unlikely Cosmos will get its wish today though it probably won’t withdraw its bid, either, said National Bank’s Adam Shine in a research note.
“Despite the threats made by Cosmos last week suggesting it would re-think its proposal if it weren’t given access to an as-yet non-existent data room, we’d surprised to see Cosmos withdraw its conditional proposal,” he wrote.
“The biggest question for us is whether a third party will come forward over the next few weeks with a high enough offer. It’s unclear how much more Cossette is worth beyond $5/share given the state of its recent results and a slow-moving economic recovery expected to unfold in the short term.”
