This is a stock deal and SunOpta retains 18% of the company and I assume is responsible for 18% of the ongoing expenses of bioprocess? And what about the obligation to Blackrock? How is that handled? Does STKL actually net anything from this sale after everyone is paid? And since it is a stock sale, when can STKL sell the Mascoma shares?
These are my questions. Can anyone answer them?
Finally, some of the high future earnings estimates by some analysts may be attainable without the albatross of Bioprocess around the neck of the company. Based on past costs of the division, it should add a few cents to earnings.
Haven't been here for a while, still off on my 'sabbatical'.
I did get a bit of kick from the way the press release was written....... told of how wonderful the combination would be, and gave an invented number for the "value"... yet one had to read the bottom of the release to see that STKL really didn't get anything but paper.
I honestly think a better release would have been "SunOpta continues consolidation to Core Operations".
By the way, and just a gut thing......... why would a bank like Citi start coverage on something like this? Sale or secondary comes to mind.
The announcement was a bit confusing to those of us who aren't accountants. I read it differently (and quite possibly incorrectly. I thought that the $51M is in common and preferred shares of Mascona (a company I have never heard of and could not find listed - but which has a very attractive web-site). As a result, SunOpta (and as a result, indirectly its shareholders) will obtain an 18% ownership in Mascona
So... SunOpta bascially gains an investment in Mascoma, which will fluctuate based on the success / failure of that company. SunOpta will not have to fund any of the ongoing expenses. Going forward, I think that SunOpta will record gains or losses associated with the new investment when/if they either get dividends, sell their shares in Mascoma, or determine the need to take a write-down in teh unfortuante event that it becomes clear that the value of the 18% holding in Mascoma has deteriorated.
I assume the immediate sale results in a gain or loss based on the book value of SBI just prior to the sale (was it more or less than $51M less the transaction costs).
After that ... SunOpta and its shareholders (like me) have upside to the extent that Mascoma excels going forward and the continuted risk of the company's $51M stake becoming worthless.
I hope my rambling was helpful ... and accurate. If anyone else has a different understanding please share.
The Blackrock put option is an obligation of BioProcess, not STKL, the ex-parent. So, STKL isn't (and wasn't) liable on that, other than the value of BioProcess.... and now, the value of the Mascoma.
It DOES make STKL's balance sheet and income statements read a lot clearer, the value of the Mascoma stock will simply be listed among "Assets", at "cost", which is the number the accountants assign to the initial value.
The $51 million isn't real money, in the sense that STKL could use it for anything, or spend it, or such. It's simply the number that Mascoma and STKL agreed that the shares were worth......... and that number is, shall we say, open to interpretation.
It DOES take away the cash drain and income statement losses that BioProcess stuck onto STKL's financial statements. Of course, it also takes away a ton of the upside in BioProcess... if there every are any.
Mascoma is a private company so the value of the shares will be hard to discern but should appear somewhere on the STKL statements. You are right that the chief downside is if Mascoma fails or doesn't perform as hoped. I would still like clarity on how the Blackrock obligation is treated under this sale.