If Gores walks, I say we take them to court.
For the three months ended April 28, Pep Boys — Manny, Moe & Jack said it expects a profit of $12.4 million, or 23 cents per share, on revenue of $513.5 million. Analysts on average expected a profit of 26 cents per share on revenue of $557.4 million, according to FactSet.
Without giving details, Pep Boys cited "variety of factors occurring in the ordinary course of business" for the performance and said it was employing new strategies to improve results.
Material Adverse Change Clauses and Acquisition Dynamics
David J. Denis and Antonio J. Macias
Material-Adverse-Change clauses (MACs) are present in virtually every acquisition agreement. These clauses are the outcome of extensive negotiation and exhibit substantial cross-sectional variation in the number and types of events that are excluded from being 'material adverse events' (MAEs). MAEs are the underlying cause of 69% of acquisition terminations and 80% of renegotiations. Moreover, these renegotiations lead to substantial changes in the price offered to target shareholders We find that acquisitions with fewer MAE exclusions are characterized by wider arbitrage spreads (i.e., the difference between the price offered to target shareholders and the current market price of the target's shares) during the acquisition period and are associated with higher offer premiums. We conclude that material adverse change clauses have an economically important impact on the dynamics of corporate acquisitions and stock prices during the acquisition period.
MT, poked around the GILT deal, found this old post:Gilat Satellite Networks Ltd. shares dove 7.3% to close at a new one-year low of $8.01 at a spread of $3.39, or 42.32%, on Monday, Aug. 25, as a buyer consortium led by Gores Group LLC said they will not close a deal at the agreed $475 million, or $11.40 per share.
While some arbs believe the private equity buyout of the Petah Tikva, Israel-based satellite communications company is all but dead, others say there may be hope for a reprice.
Gilat said in its second-quarter earnings statement Monday that the buyout group, consisting of Gores Group, Mivtach Shamir Holdings Ltd., DGB Investments Inc., a San Jose, Calif., firm affiliated with investor Douglas Bergeron, and companies affiliated with Roy Ben-Yami, Ami Lustig and Eytan Stibbe, verbally informed the company that they will not close the deal at the agreed price despite the fact that Gilat informed them on Aug. 5 that all closing conditions had been met.
PBY is shockingly close to how GILT played out. I never looked into if Gores actually paid the break fee, when I left they -mgt- were suing for it, despite an iron-clad MAC clause. IIRC, anyway.
To your point above, that 50mm call option is not even certain here.
"I really havent even bothered looking at the prelim. Were other bidders lined up or what ?"
There was another bidder that pushed Gores up. Then they tried to go down to the 14s, and ended up at 15. The summary I linked to is better than mine.
My guess is the worry is more about reps and warranty than MAC, but WDIK? Sounds like a misunderstanding on how bad the biz really is, whether you call it reps and warranty or MAC doesn't really matter; even if a court forces them to close the deal, doesn't mean they will. Seem to remember that on the HUN deal. Didn't even matter how tight the MA was, and it was really tight in the HUN deal.
Remember, all of these PE deals are simply call options. Break fees, court costs, and reputation risk are just part of the premium. No one seemed to suffer rep risk during the HUN era. Remember, Cerberus walked on URI without a MAC -- here's your break fee and a little circus in court to give the bloggers and talking heads something to talk about -- then good luck.
I would think in this era, Gores would suffer some rep risk, as no one else seems to be walking on deals. And I was also wondering if it was the same Gores who was involved with/walked on GILT, or was that someone else.
Well, enough blather, good luck out there.
I am not a lawyer, but it certainly does not look like a MAC to me. That said, I can't name a single PE deal that closed at the original price once the buyer got ants in his pants, MAC or no. I'd love to hear of one for reference if anyone else remembers one. There may have been one, I dunno.
IMHO, the best possible outcome for arbs now is closing at a lower price. Looks like there is poison in the well at this point. Filing the proxy seemed to announce that fact, I think. My take is that they were gonna file last week, tried to work it out, and could not, but hard to infer everything that went on from those K's and PR's.
Anyone got a different take?
And, FWIW, here's an interesting executive summary of the background section of the original proxy --
Hopefully the Deal Prof will weigh in in the next 24, tho PA law may be uncharted territory for him.
thanks mariyatrader, good link - I believe Apollo tried to walk on Huntsman and the judge ordered it to be completed: