By JEFFREY JONES, ANDREW WILLIS
Friday, December 7, 2018
An investment company controlled by a British billionaire has offered to take Callidus Capital Corp. private for $2 a share, a fraction of the target price that Callidus's chairman had set for such a deal.
Braslyn Ltd., owned by Tavistock Group founder Joe Lewis, has made a non-binding proposal to buy Callidus's minority public float in a cash deal that would peg the value of Callidus at about $114-million, excluding debt of $567-million. Bahamasbased Braslyn has a 14.5-percent interest in the firm, which lends money to distressed companies.
Although it is a premium to the recent market price, the offer would be a tough pill to swallow for any minority shareholders who have hung on hoping for some recovery. If accepted, Callidus would be sold at 14 per cent of the value at which it went public in 2014.
Callidus is 72-per-cent owned by Catalyst Capital Group Inc., the private capital firm led by Toronto financier Newton Glassman. Mr. Glassman launched a process to take Callidus private in late 2016, although he has said little about the prospects of a transaction in the past year as financial results weakened and its stock price tumbled.
Braslyn made the non-binding proposal to a special committee of Callidus's board on Nov. 28, according to a statement, although it only publicly disclosed it on Thursday. The offer isn't conditional on raising any financing, it said.
In 2017, Callidus said there had been strong interest in a deal among would-be suitors - 17 had come forward to talk - and that the company could be worth $18-to-$22 a share based on a valuation from National Bank Financial.
Before being halted on Thursday, the shares sold for $1.71 on the Toronto Stock Exchange.
"Braslyn has been in favor of the board's efforts to improve shareholder value," it said. "However, during the last two years, the board has not been successful in completing the privatization process and the company's operations and stock price have deteriorated."
Braslyn officials were not immediately available for further comment.
Mr. Lewis owns British soccer's Tottenham Hotspur as well as one of the world's most valuable private art collections, including works by Picasso, Matisse, Degas and Modigliani. His superyacht, the 98metre Aviva, is frequently photographed on various international waterways, including the River Thames in London and the Hudson River in New York.
A Callidus director said he could not comment yet on whether the company believes the offer is fair. "We have hired independent counsel and advisers, and will report back to investors," said Toronto-based accountant Tibor Donath, who has been on the Callidus board for 12 years.
Mr. Donath said he has been told that Catalyst Capital does not plan to sell any of its Callidus shares to Braslyn. Catalyst spokesman Dan Gagnier said the firm had no immediate comment.
Callidus, which has a $1billion loan portfolio, has struggled with large loan losses and its shares took a beating earlier this year when it scrapped its dividend.
Mr. Glassman, meanwhile, stepped back from day-to-day operations at Callidus this summer prior to undergoing spinal surgery, which the company has described in detail in its disclosures.
Patrick Dalton was named interim CEO in late October. There have been other executive changes as well.
Last month, Callidus reported a fourthquarter net loss of $20.4-million, deeper than the $17.6-million loss in the same period a year ago and its eighth consecutive quarterly loss. The red ink reflected a $24.7-million provision for bad loans, it said.
But on Monday, it announced it had struck a deal to sell the commodity forestry and lumber business of one of its portfolio companies, C&C Resources Inc., for $100-million in a deal expected to close in early 2019.
Clouding the picture, Callidus has been embroiled in a lengthy legal dispute with a group of investors as well as Wall Street Journal reporters. Mr. Glassman alleges they conspired to drive down the share price to benefit short-sellers by publicizing whistle-blower complaints to the Ontario Securities Commission. The defendants, including Greg Boland, founder of West Face Capital and a rival in numerous court disputes with Mr. Glassman, have denied the charges. Mr. Boland has countersued.