Another demand for Pivot Technologies to conduct auction as opposition to share conversion deal mounts

Another voice was added to their email list requesting /demanding the board of TSX-Venture listed Pivot Technologies Solutions does something to enhance shareholder value and seek a better offer for that company that designs, sells, integrates and supports IT solutions

The company has agreed C subject to a shareholder vote C to a proposal in which the shareholders, other than the so-called Founder Group, would convert their stake to high distribution paying preferred securities. In this way all of the upside at Pivot C which employs almost 800 people and which generates US$1.5 billion in revenue – would flow to the Founder Group which owns about 18 percent of the common shares.

But that proposal has attracted its share of critics including Torrent Capital, a shareholder that owns about five per cent itself and speaks for an additional seven percent. Torrent, that has expressed strong disagreement with the deal since it undervalues Pivot, has presented a multi-part intend to boost shareholder value. Torrent ‘s opposition to the deal increased when it was revealed that Pivot and Inflexionpoint (a personal company started through the same people in the Founder Group at Pivot) would sign a consulting and revenue sharing agreement as part of Pivot’s plan to expand into Asia.

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Another observer, The Investment Doctor writing on Seeking Alpha, asserted he was “not in love with the sale because the offered preferred securities are non-cumulative and callable,” adding “additional sweeteners will be required to convince me.” An investment Doctor said he would “prefer an upright cash offer,” with another criticism being that “the current shareholders of Pivot TS are now being placed on the sidelines with regards to the decision making process.”

Now Ralph Garcea, an analyst at Cantor Fitzgerald has weighed in again. Garcea, who like all of those other Street is anxiously awaiting the release of Pivot’s fourth quarter financials, previously called around the company to conduct an auction, and has a $1.50 price target.

This time round, Garcea used the current sale of U.S.-based Ingram Micro to Chinese-based Tianjin Tianhai for US$38.90 a share to issue another report and demand an auction of Pivot.

“This is why we want an auction,” wrote Garcea in a note to clients Thursday. Ingram Micro is the number one global technology value added reseller (VAR). Tianjin Tianhai has developed from a traditional marine shipping company right into a modern logistic industry investor and operator,” he explained when referring to the sale he says represents an enterprise value/EBITDA multiple of seven times “and easily takes out Ingram Micro’s 5 year high.”

Applying exactly the same multiple to Pivot leads to a share price between $0.75-$1.50 a share.

In his note, Garcea asked: “Who’d have thought a Chinese logistics company was looking for a worldwide IT value added reseller?”

Given this week’s deal with Ingram Micro and also the Chinese buyer, Garcea believes there’s two possibilities from the current embroglio: a strategic or private equity buyer to step in and supply an excellent proposal, or management to up their bid in an all-cash offer.

“Pivot would take advantage of an auction tactic to maximize shareholder value C and remove the all-time high in stock price as a minimum valuation,” he wrote.