Oh. Somehow I didn't notice this was a Q4 post. Been a while since anyone has posted anything. My comments are for Q2 2012.
Also of note, if you include both wholesale and retail, domestic sales (29.3 mil) surpassed international sales (28.8 mil) for the first time.
Like he said in the conference call, they're not commenting on it. We have to wait for Barclays and the Zhongpin "special committee" to make a press release. To timeframe has been given as far as I've heard.
Actually they usually do. I invest almost exclusively in deal arbitrage.
In the Amylin deal, investors are expecting (and will probably get) a better offer after the rejection.
What caught my eye about this one was the line the chairman added to his letter of intend saying that he would not be willing to sell his stake to another bidder.
Whether thats true or not is unimportant. But he didn't have to include that. The only motivation I can see for him to add that line would be that he actually wants the deal done.
These things are never a certainty and its hard to calculate the return since we have no timeline at this point, but I think this deal will get done. The 30% spread makes it a good risk.
It seems unlikely that this is anything other than a genuine offer. If they wanted to drive up the price to dump shares, they would have been better able to do that before the last earnings were announced.
It seems more likely that they see the reaction to earnings as an opportunity.
At the current price, its a tempting looking spread.
What are the risks to the buyout?
The deal is subject to the chairman pulling his offer or failing to get financing. Anything else?
Even if they're not floating stock, having the ability to do so should they decide they want to, is still worth something.
The only benefit to management in taking the company private might be the suspension of reporting requirements (which is a minor nuisance at worst).
But they might not need to make a tender offer to accomplish that. There's such a small float that is possible they'd be in a position to go dark already if they wanted to.
And even if they didn't have that ability (they need less than 300 shareholders), they wouldn't need to offer an 85% premium to the current price. They don't have far to go to achieve 90%.
Though I'll happily be proved wrong with a $3.50 tender.
Great post! Lots of supporting evidence. Well researched. Eloquently said.
Keep it up!
The 10K released the next day answered my question about stores. I'm sure you've all read it by now, but here it is as a reference:
As of December 31, 2010, we had 293 stores, including 31 flagship stores, with each store generating average revenue of approximately $12,000 per month. The majority of our retail stores are situated as stores-within-a-store in large, mid-tier department stores located in over 20 provinces in China.
So roughly 90% store-in-stores and lowish revenue from the flagships.
Raw material costs (ie. cotton) has been given quarter after quarter as a reason (in some quarters the only reason) for contracting margins at evk. This article has given an opinion on why cotton prices have run up so fast and reasons that could lead to a fall this year. There are good things about EVK's business. There would be more to like if they were able to stop shaving their margins due to raw material costs.
Kind of solid I guess. What did you like about the results? Keep in mind that when comparing with the reduction in sales in 2009, its not difficult to make this years results look good.
But ya, sort of ok results.
- Net sales were right in the middle of what they were expecting ($121-141). (Thats from last year's guidance. I didn't check the 10-Qs to see if they revised during the year.)
-Hit the low end of their guidance for net income ($6.5-7).
-Margins keep sliding though. The full year were even lower than Q3 which means they must have slid quite a bit in Q4. Can't really blame them for raw material costs but its lower margins all the same.
-The new store openings guidance for 2011 was a little lower than what you might expect given they're targeting 1000 stores by 2015 (I assume thats still the plan).
-Still have no idea how many of their stores are actual stores and how many are store-in-stores (ie. LGG racks placed in another store). I assume its mostly the latter. 293 real stores should generate way more than $29.3 million. Thats only $100,000 per store (sales!, not profit).
Those are just the things that caught my eye. Maybe someone else can post their thoughts. I'm no expert at this by any means so would appreciate some alternate views or corrections.
Also I didn't really get what the 7 cents in reduced exposure to derivative liability was.