BASF is one of the larger companies in the world,
they are more than large enough to list over here.
Even if they don't list, with all float this deal will
create in BASF stock over here there are plenty of
market makers who would trade it through the pink
I used to own National Bank of Canada stock. It
traded 5 or 6 digits of stocks a day through the pink
The lack of a listing over here is not an impediment.
Losing a potential 50% of my gain to the government IS
gross negligence by management.
Different shareholders apparently have
significantly different tax concerns. Reading the tax release
from the company and only knowing the tax laws from
what I read in the papers, AMCOL's corporate
shareholders will report a larger share of the liquidating
dividend as dividend income than individuals.
could lead corporate holders to opt for all capital
gain and sell now - thus the selling pressure now.
Depending on their basis, individuals may opt for that too.
But who want to buy now? You pay $16 for a
dividend in April and a stock that is difficult to really
assess in the short term
(the period shortly after
the dividend record date). Many do not like stocks
below $5. Others
like only stocks under $5.Some were
investing in a chemical company and have no interest in a
minerals company. There may be significant selling after
the liquidating dividend. Then, your $16 may get you
8 shares instead of 2.
Many (which has a
strained definition for this stock since so few watch it
at all) are waiting to buy it at that time.
<<the firm has said it will pay $200
taxes or about $7 1/2 per
It may be that much of the payout may be considered
return of the capital and may be tax free for the
The big mystery in my mind is why AMCOL's
management would structure the deal in this way. In my
opinion they could have done a much better job for their
shareholders. ACO was a stock conservatively worth about
$22/share without any buyout. It was growing at least 20%
with forward earnings of $1.10. Historically it has
traded with a 20 multiple under these conditions. Sure,
the market did not recoginze that but then what small
cap value firms has it recognized lately? History
shows that conditions like this will exist from time to
time but the value is always eventually recognized.
The BASF deal, while certainly a good way to unlock
the value here, was executed poorly. Instead of doing
an asset sale where now both the company and the
shareholders have to pay taxes on the gain, I don't understand
why they did not do a stock deal -- giving
shareholders a distribution of BASF shares instead of cash.
With BASF paying around $650M for Chemdal alone and
even after subtracting the $100M in debt the entire
company had outstanding, this was worth about $20/share
to ACO shareholders based on the 27 million shares
of ACO outstanding -- and that is only for the
Chemdal portion. For their investment bankers to say that
this is a fair deal for shareholders is irresponsible
and invites a lawsuit in my
Nevertheless, with ACO trading around $16/share today there is
still value here. Given that Chemdal contributes about
2/3 of the earnings and that ACO is expected to earn
$1.20 over the next year, we should expect the
remaining company to earn about 40 c/share in 2000. What is
this remainder worth? Certainly the growth rate will
be lower. I don't think we will see 20% again
unless/until the nanocore business starts to take off, so if
you look at S&P historical data before Chemdal
existed it shows that ACOL traded with a PE of roughly
10-29. Taking the worst case of 10, the rest of ACO is
today conservatively worth $4/share based on earnings
of .40/share. So since shareholders are going to get
at least $14/share for Chemdal we really should be
trading at $18/share. Why then $16? Well, there is a
possibility the deal will not go through (which would be a
good thing for shareholders in my opinion). But if you
think the deal will go through it is probably better to
wait for the distribution because ACO should be
trading at around $4 after the event.
unfortunate outcome of this story is that shareholders really
should have received a minimum of $24/share. If
management would have had some patience and focused on
growing the company instead of trying to cash out in this
manner the market would eventually have recognized this
and I think we all would have been a lot better off.
Your post is appreciated. I was starting to
wonder if anyone was interested in this board - or for
this company. They are down to one analyst following
Some answers to your questions are found in the
transcript of the conference call when they announced the
deal. This transcript is posted on the company's
corporate web page.
They have said that the deal is
worth doing because they are the only substantial SAP
supplier without an in-house supply of acrylic,
cost component, and they felt they could get squeezed.
The structure of the deal
was required to get the
deal done, and BASF paid up substantially to do the
deal this way.
Accepting those statements, the
company still could be purchased at a deal to your
liking. There are $200 million going to the
out of the $656. Offering the same cash to the
shareholders instead of the company would yield $22/share and
give the buyer the whole company. If this is a deal,
you would think that someone would make a bid, even
If they don't, perhaps it is not so
great a deal.
I like your value analysis. Also note
that the book value of the remaining business is
expected to be around $4.75/share. If your numbers go way
back, can you confirm that the company used to trade
between 1 and 2 (or more)times book?
I think people
are not interested in paying $16 or $17 for a stock
to get a $14 dividend in April and a stock worth $4.
Why not wait until the X-div date and buy it at 2 or
3 as some shareholders sell their stock. Many do
not want a company this small.
While I too would
have preferred more, waiting for the market to respect
what they are doing has certainly been exasperating.