In January 2019, Procurri Corporation (Procurri) had announced that a potential party was conducting due diligence on the Company’s financials and operations to consider a possible transaction. The stock price has been on the tear as it rose from the closing price of $0.27 on 7 January to a high of $0.315 when it disclosed on 3 February that it had received a non-binding letter of intent (LOI) from an offshore fund management firm known as New State Capital Partners (New State), for the proposed acquisition of all the shares of the Company, apart from treasury shares and shares held by substantial shareholder Irrucorp, via a scheme of arrangement.
At that time, terms of the offer, including pricing and other details were not disclosed as the Company went on to say that it has not accepted the LOI and has not commenced any exclusive discussions with New State about the proposed acquisition. In the Business Times article published on 04 February, it was reported that New State ,a private investment firm based in the United States, focuses on investments in business, healthcare, and industrial services industries.
Later, on 19 February, the Business Times reported that New State has withdrawn its offer, causing the stock price to slump.
According to FY17 Annual Report, Irrucorp –Procurri Chairman Thomas Sean Murphy and executive director Edward John Facbarth –has about a 12 percent interest in the shareholding capital of Procurri.
While, one might think that a possible privatisation of Procurri Corporation by New State might be looming, on 07 February after the Chinese New Year holidays, it was reported that a second unsolicited, non-binding expression of interest (EOI) from a third party was received by Procurri Corporation to acquire it through a possible voluntary general offer. This caused the stock price to surge higher to $0.345.
However, the enthusiasm evaporated in the following day on 08 February, when Procurri Corporation later disclosed that the Company has terminated discussions with the second offeror and treated the second unsolicited, non-binding EOI as having expired in accordance with the terms of the agreement. The stock deflated to close lower at $0.33 on volume of 843,000 shares traded on that day.
On 19 February, the stock price took another blow when New State dropped its plans to buy Procurri stake, with no reasons being provided. Procurri’s stock crashed to $0.265.
A Rollercoaster Ride
What Should Be An Acceptable Offer Price, If Any?
While the recent acquisition offers have been dropped, investors should not rule out future potential offers after this bout of interest shown for Procurri. In my earlier article posted on Shares Investment in January 2019, a possible valuation multiple of 0.47 times Enterprise Value-To-Revenue (EV/Revenue) to five times Enterprise Value-To-EB ITDA (EV/EBITDA) multiples or more might be assigned to any potential offers. This is based on an evaluation of the overall business, market capitalisation as of 11 January 2019, and its existing debt and cash level.
How should shareholders and investors act on the counter?
As noted in the Shares Investment article previously on 21 January 2019, Procurri’s management has reiterated that shareholders are advised to exercise caution when dealing with Procurri shares and refrain from taking any action that may be prejudicial to their interests.
The rollercoaster ride seen in the recent stock price movements of Procurri for the past month is not for the faint-hearted. Therefore, it pays to show that investors should heed the words of management rather than to time the stock price movements.
The fundamentals of the Company, as illustrated in the earlier article are still intact. For now, Procurri’s debt-to-equity (D/E) ratio has been steadily declining, and its gross margin remains to be steady at 30 to 35 percent level. Moreover, cash and cash equivalent balance has risen to $20.7 million as of 9M18 from $18.5 million in FY17. This could provide some assurance that the Company’s overall financials remain reasonably sound, barring any dramatic changes in the overall capital structure and operations of the Company.
Potential Party Still Mulling An Offer For Procurri Corporation