A negotiating “catch 22” has brought Cossette’s uneasy dealings with Cosmos Capital to a stop as the Quebec City-based agency stands by the American investment firm that could acquire it in December.
This morning Cossette’s board of directors issued a formal rejection of Cosmos Capital’s unsolicited acquisition offer of $7.87 per share.
Instead, it is standing by its recommendation of an earlier offer of equal value from Greenwich, Conn.-based Mill Road Capital, which it endorsed Nov. 10.
Cosmos, led by former Cossette executive François Duffar, matched Mill Road’s $7.87 price on Nov. 17 following two previous unsolicited offers. These matching bids value Cossette at $131 million.
The board deemed Cosmos’ offer “not in the best interests of Cossette” because, unlike Mill Road’s all-cash bid, it is subject to further due diligence. Cossette also said because Cosmos’ offer is contingent on seeing the agency’s private data, it could not accept without breaching its signed agreement with Mill Road.
The issue of Cossette’s private data has been one of contention for Cosmos. While other companies that were part of Cossette’s search for a buyer were allowed into the virtual data room, Cosmos was barred because its offers were unsolicited and outside Cossette’s formal process.
When Cossette’s board endorsed Mill Road, it signed an agreement that closed the books to all other companies except those that made offers superior to Mill Road’s. With further due diligence serving as a roadblock, Cosmos remains on the outside.
However, the Mill Road agreement has also revealed an impasse that could prevent shareholders from getting a higher price for their holdings.
Simultaneous to its $7.87 offer, Cosmos sent a letter to Cossette’s board suggesting it might raise its offer as high as $8.10 per share if it were granted access to the company’s books.
Cossette does not consider this letter a formal offer and, therefore, will not let Duffar in.
Without a higher offer, the books are closed, but with the books closed Cosmos will not raise its current offer, leaving the prospect of more money locked away until one or both sides change their position.
Cossette’s statement from this morning said conversations with Cosmos about a possible higher bid were “continuing.”
The agency had previously asked Cosmos for several due diligence items including proof of “equity and debt financing sufficient to finance a purchase price of $8.10,” and said found Cosmos’ response to be “incomplete.”
Cosmos did not return calls for comment by press time.