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.
Thanks, Data, for the clarification. This is by far a much cleaner company now and much easier to value for analysts -- and potential acquirers. Only thing left is Opta Minerals, which is more of an asset than SBI at least in terms the cash it generates and the "real" cash it might yield in a sale.
datasource2000, from an industry and analyst perspective, the merger has much more upside. The merger consolidates legal protections and industrial partnerships and moves both companies in line with other consolidations. It also moves Mascoma's commercial projects into STKL's earnings streams when commercial production begins. Pretreatment is a necessary component of cellulosic ethanol but it is much more economical to horizontally integrate mutually beneficial technologies. Now STKL shareholders will be able to benefit from Mascoma's contracts as well.
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.