Cosmos Capital upped the offer and the rhetoric yesterday in its bid to take over Cossette.
The company started by ex-Cossette senior executives François Duffar and Georges Morin announced it was going directly to Cossette shareholders with a new binding, fully financed, all-cash offer for the company of $5.25 per share.
Cosmos launched its takeover with an offer of $4.95 in July but has been effectively stonewalled since then as Cossette went shopping for other buyers.
Cossette said earlier this month that “more than five” potential investors are considering formal bids. It is not known if Cossette has updated shareholders about the value of other offers relative to what Cosmos has put on the table. Cossette was unable to comment by press time today.
“The Cosmos offer is a compelling one and represents a full and fair price for Cossette shares, given the company’s financial performance and current business risks,” said Duffar, chairman and CEO of Cosmos, in a release announcing the offer. “For shareholders, it has the benefit of providing them with the certainty of an immediate cash payment for their shares.” Calls to Cosmos for comment were not returned.
Duffar and current Cossette CEO Claude Lessard worked as partners for over 35 years to build the agency network into Canada’s largest, with offices around the world.
The unraveling of the partnership that left the two men struggling for control of the company lent soap-operatic undertones to the takeover that seemed to bubble to the surface yesterday.
In the release, Cosmos said Lessard and the board of directors have worked to effectively prevent shareholders from being able to respond to the Cosmos offer, and suggested the company has floundered with Lessard at the helm.
Specifically, Cosmos said the board quietly granted Lessard 200,000 options (roughly 1.2% of the total outstanding shares) on Aug. 7, three days after enacting a shareholder rights plan. The move, said Cosmos, moved senior management “closer to a blocking position on any sale of the company.”
It was “difficult to justify” the grant to Lessard, said Cosmos, when the company had its “worst financial performance ever” in the last quarter, generating losses of $18.4 million.
“Revenue fell 23%, poor in both absolute terms and relative to industry averages of under 10%. The company has lost long standing-significant clients, has seen its quarterly earnings decline 53% in the first quarter of this fiscal year before making losses in both of the last two quarters, and has seen its share price decline 78% over the past two years to a low of $2.70.”
Cosmos said it was for those reasons it was attempting to go directly to shareholders with the offer, and was only awaiting the up-to-date shareholder list from Cossette to do so.
