Monster’s largest shareholder has called on other stockholders not to support the company’s sale to Randstad and said it is seeking to replace Monster’s board of directors.
In a letter to Monster shareholders, Media News Group charges that “the proposed sale to Randstad at a fire sale price resulted from a rushed and flawed process and it significantly undervalues the Company.” It’s a claim the newspaper company first made in August, not long after the $429 million deal was announced. Now, MNG claims the “deal was entered into by the board out of desperation to avoid announcing yet another quarterly miss by the Company.”
Randstad’s offer to buy Monster at $3.40 a share was announced the same day Monster reported losing 2 cents a share (after adjustments) during the 2nd quarter. Analysts had been expecting the company to post a 3 cent a share profit.
In response, Monster issued a statement pointing out that MNG “is asking stockholders to reject an all-cash, premium offer in exchange for the hope that an undisclosed strategy led by their yet-to-be-selected director candidates will deliver significantly greater value sometime in the future.”
The brief statement doesn’t address the specifics in the MNG letter; it simply notes that the Randstad offer was almost 23% higher than Monster’s closing stock price the day before the deal was announced. “Our Board unanimously recommends that Monster stockholders accept Randstad’s all-cash premium offer, as we believe it maximizes value for Monster stockholders.”
However, the MNG letter does make a case that Monster had other interested buyers potentially offering more. In making the charge of haste, MNG cites a chronology Monster filed with the Securities and Exchange Commission. The document details five other interested parties, which are not identified by name, and preliminary price discussions as high as $5 a share. Three dropped out, but as late as July 21, not quite three weeks before the Randstad deal and Monster’s financial results were announced, two parties were still actively interested in buying the company.
On July 20, Randstad presented Monster with a non-binding $4.00 a share offer, and a pledge to complete the deal by August 9, the day Monster had previously said it would release its 2nd quarter results. Randstad, which had been in talks with Monster since the spring, wanted exclusivity.
That same day, Monster called “Strategic Acquirer E to inform them that, as had been anticipated, Monster was under time pressure and that if Strategic Acquirer E wanted an opportunity to proceed Monster would need to receive their written proposal no later 10:30 am on July 21, 2016,” according to the SEC document.
The potential buyer asked for more time to get its financing in order, and said it could probably come in with an offer of $4.15 to $4.20, per share. But it did not provide a written indication of interest or a firm offer.
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The second potential buyer called Monster on July 21, just prior to a special board meeting to discuss the Randstad proposal. This party, “Financial Acquirer B,” expressed “disappointment regarding Monster’s second quarter results and concern regarding Monster’s forecasts for the third and fourth quarters of 2016 previously provided to them.” Acquirer B asked for a meeting with Monster executives to talk about the financials. Instead, “Given the pessimistic tone of the message and the impending firm proposal from Randstad, with its demand for exclusivity, Monster did not respond to this inquiry from Financial Acquirer B,” the company explained in the SEC filings.
Over the next two weeks, Monster, its financial advisors, and Randstad negotiated terms of the sale and discussed Monster’s financial outlook. On August 4th, 5 days before Monster wanted to announce a deal, Randstad’s North American CEO Linda Galipeau called Monster to say Randstad and its advisors “did not believe that Monster would achieve the profitability that they had previously assumed in determining their valuation$4.00 a share was too high.” She offered $3.40 a share, which after Monster CEO Tim Yates polled his board, was accepted.
In detailing this series of events in its shareholder letter, Media News Group says, “it seems clear that Monster’s false sense of urgency, created by management’s fear of missing quarterly earnings again, drove the irrational decision to put such a short deadline on a serious buyer, making it more difficult for that buyer to submit a more formal offer.”
Besides urging shareholder not to accept Randstad’s offer, MNG says it is making efforts to unseat Monster’s Board of Directors.
“We are assembling a slate of director candidates to replace the current board, which has proven time and again its inability to make the right strategic and operational decisions to create value for shareholders. We are confident that with the right leadership and oversight, Monster can stem the revenue declines it is experiencing and restructure its operations to significantly increase profitability.”