Shareholder opposition causes Pivot Technology Solutions to back away from going private

It took awhile, however in the end common sense won out: TSX-Venture listed Pivot Technology Solutions and the Founder Group aren’t proceeding using their heavily criticized proposed plan of arrangement.

In that plan, shareholders other than the Founder Group were being offered higher yielding preferred securities in exchange for their common shares. No cash was offered.

Plans required the non-public Pivot to then sign a 10-year consulting and revenue sharing agreement with Inflexionpoint, a personal company that has an overlap of personnel with the Founder Group. Pivot said the consulting agreement was necessary to help fund the distribution on the preferred securities.

Shareholders and analysts disliked the offer because the price on offer was too low (one analyst estimated the “public” Pivot was worth twice what shareholders were being offered), because there wasn’t any auction to canvass potential buyers and determine the right price, and since the transaction favoured the Founder Group, which was aware of what a consulting and revenue sharing agreement could generate for the “private” Pivot.

Doug Stuve, chairman of the special committee come up with to evaluate the sale in the Founder Group asserted “according to various factors, including feedback from your shareholders, the board and also the Founder Group determined it’s within the Company’s welfare not to proceed using the transaction.”

But shareholders, who’d most likely have voted on the proposal, were thrown a bone: They will get a higher dividend starting with the second quarter. Now they will get $0.01 one fourth C or $0.04 annually C up from the previous $0.03 per share each year. Pivot started paying a dividend in March 2015.

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Another interest in Pivot Technologies to conduct auction as opposition to talk about conversion deal mountsPivot’s nemesis Torrent Capital presents alternative plan that would benefit all shareholders

Torrent Capital was certainly one of Pivot shareholders most in opposition to the transaction. Scott Gardner, the firm’s founder and managing director said Wednesday his firm was “pleased they’ve pulled this poorly constructed deal that in the outset was clearly away from best interests of the common shareholders. It’s unfortunate the procedure has shaken confidence in the board as well as in management.”

During the procedure, Torrent has put together its own proposal for that company. “What’s bothersome is the lack of information presented to common shareholders throughout the process,” adding “when coping with an internal bid, there needs to be to the next stage of knowledge dissemination.”

For its part, Pivot announced the proposed transaction after January and provided an update a few weeks later. Torrent made three releases as the proposed transaction was live.

Torrent, with a six per cent stake and which spoke for a number of other shareholders, continues to be a strong believer in the company that generates a lot more than US$1.5 billion in annual revenue. Gardner calls Pivot “a tremendous company that is still undersold by management and the board and that we look forward to following through and create value for shareholders.”

Ralph Garcea, an analyst with Cantor Fitzgerald issued an email Wednesday that highlighted a number of unanswered questions including: whether the listing could be moved to the TSX; what’s the status of the normal course issuer bid; and what is the status from the consulting contract with Inflexionpoint.

Garcea, the only analyst covering Pivot, urged management to concentrate “on the active growth not complacency,” approach favoured by Torrent.

Pivot closed Wednesday at $0.51.

Financial Post

bcritchley@nationalpost.com