Shareholders increase pressure on Pivot Technology to pull deal

The board of Pivot Technology Solutions, a California-based TSX Venture listed company that recently agreed to a share exchange whereby several insiders would acquire control without having to pay any cash, have now been put on notice by certainly one of its large public shareholders.

A few days back when Pivot announced its support for a deal whereby shareholders (apart from the what Pivot calls a “Founder Group” which owns 18 percent) would exchange their common shares for higher yielding preferred securities, Toronto-based investment company Torrent Capital said hello “vehemently opposes” the arrangement.

Torrent, which has in regards to a five percent stake within the company that has about US$1.5 billion in revenue, listed its objections: the offer undervalued Pivot; control had been given up without premium and no cash payment; all the upside would flow towards the so-called Founder Group; and the insufficient a formal valuation. Torrent said hello was getting excited about dealing with other stakeholders to be able to “maximize shareholder value.”

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Other your customers joined in: Ralph Garcea, an analyst at Cantor Fitzgerald issued a report and posted a one-year target of $1.50 or twice the value Pivot had assumed when valuing its common shares that’ll be converted to preferreds; other investors noted they bought Pivot because of its growth potential and never for the yield on its about-to-be-issued preferreds; others wanted Pivot to do an auction to obtain more bidders; as the market adopted the view the offer wouldn’t close as the shares remained well underneath the $0.70 per share deemed value.

Since then Pivot has filed more details about the transaction and its plans as what is effectively a private company. The end result: Torrent likes what it really sees less.



Torrent’s attention was drawn to Schedule D of the so-called Arrangement Agreement. Known as the Consulting Agreement between Inflexionpoint Asia Pte. Ltd. and Pivot. Based on that agreement, Inflexion is a private company whose mandate “is to produce a multi-billion dollar, emerging markets-focused IT logistics company.” Within the agreement, Inflexionpoint says it “desires to interact Pivot to help Inflexionpoint in rolling out the business outside The united states.” Underneath the relation to that agreement, Inflexionpoint pays Pivot “an all-inclusive yearly fee of US$1.5 million,” for a range of services. Anything includes a 10-year term.

In addition, the consulting agreement notes, Inflexionpoint enters into a revenue sharing arrangement with Pivot that relates to “any direct new international business obtained by Inflexionpoint with the leveraging of key relationships introduced by Pivot to Inflexionpoint.

Those developments C which Torrent deemed “a formal business relationship between the two entities meant to expand Pivot’s operations globally C have generated a wide open letter being sent to Pivot’s board. “It’s a material development for Pivot,” states the letter.

More disturbing for Torrent is “the overlap in corporate structure between the two entities.” Specifically two people in the Founder Group are also founding people in Inflexionpoint, while John Sculley (Pivot’s chairman) can also be chair at Inflexionpoint.

Now Torrent wants the board to “initiate a full and fair independent business valuation and strategic review;” for it to drag the going private transaction and asks that “those people who are clearly conflicted within the proposed agreement have absolutely no input or influence over the special committee from this point forward.”

Calls to 1 member of the Founder Group were referred to the top of Pivot’s special committee who definitely are available for an interview Thursday.

bcritchley@nationalpost.com