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HistoricalPEGuy (63.03)

BRNC - The most unthrilling buyout ever

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January 24, 2008 – Comments (5)

My buddy ctojeira and I saw this thing coming a year ago.  Nice company trading rediculously close to book value.  We were just thrown for how it could be so cheap.

One answer came when Wexford Capital was trying to end its position.  That kept the stock down for quite sometime - and when Wexford was done, it ran from $15 to $20 in no time.  Then it ran from $20 to $14 just as fast and has languished there ever since.

Today, we get the buyout - moving the stock to the upper $15.  With cash the total prize is actually $16.33, not great, but acceptable.  Am I happy?  No.  Am I upset? No.  I am almost shocked by my non-emotion.  The most unthrilling buyout ever.  When GSF and RIG merged I left my seat.  When AstraZeneca bought MedImunne I stripped naked and ran around the block.  When private equity gobled up Sabre I did the cabbage patch.  When ALY bought BRNC I shrugged my shoulders.

The next question is whether the new company, ALY is worth holding.  So far it looks somewhat promising, but more homework needed.

Now if someone would just pick up IMOS for $20 I'd be all set!

-- HPEGuy

5 Comments – Post Your Own

#1) On January 24, 2008 at 8:31 PM, QualityPicks (22.57) wrote:

I often find companies like BRNC, with great fundamentals and very cheap. Then I watch them drop and drop. I just can't believe it. The I take a look at the number of available shares, and almost always, the company has been increasing shares. In the case of BRNC, sales and earnings have been flat to slightly lower. But the amount of shares keeps increasing. The combination of the two means that BRNC dropped from .70 eps on the year ago quarter to just .44 this quarter. I really think this is greedy by management. ALY is the same. Their valuation is really low, but shares have been growing faster than earnings. If these companies stopped doing that, their stock price would ramp up.

I have been an owner of BRNC, ALY and IMOS in the past. So you seem to be atracted to the same metrics than me (value). However, on close inspection (usually after poor stock performance) I realize these comanies are value traps. They have potential if they stopped doing that though, but management just doesn't seem to care. So I dropped them all until I see proof that they have stopped that.

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#2) On January 24, 2008 at 8:32 PM, QualityPicks (22.57) wrote:

I forgot to mention that IMOS also does the same, they increase shares faster than earnings :) so it keeps being punsihed by wall street.

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#3) On January 25, 2008 at 1:37 PM, ctojeira (41.11) wrote:

QP:  IMOS seems to be committed to buying back the CBs that they issued in 2006 and earlier to fund operations.  This should help solve this problem.

I think the poor stock performance has mainly been due to DRAM pricing.  If DRAM prices rebound, IMOS remains committed to buying back the CBs and they continue to control CAPEX, the value of this stock will be recognized.

I see a clear path towards these 3 things happening and that's why I continue to hold my stake in IMOS.  If for any reason management changes their tune, I will move on.

 

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#4) On January 25, 2008 at 5:29 PM, abitare (49.76) wrote:

I bought BRNC a year ago and sold it at $14-15. I was waiting for a buy out and lost patiences.

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#5) On January 27, 2008 at 10:08 PM, ctojeira (41.11) wrote:

TAM LLC, with 21% ownership interest in BRNC has filed a 13D with the SEC opposing the deal BRNC made with ALY.

 

From the filing:

To ensure that Bronco is acting in the best interest of its shareholders, TAM recommends that the Board do the following:
§  Fully consider all other unsolicited bids it may receive§  Consider other alternatives to a sale§  Reevaluate the structure and terms of the existing deal
We are hereby notifying you that we oppose the proposed deal with Allis-Chalmers for the reasons set forth above.  As described in item 4 of our recent Schedule 13D filing, we may seek to meet with the board of directors and or communicate publicly or privately with other stockholders or third parties to indicate our views on issues relating to the proposed acquisition.

 

I don't think this is over yet.  With 81% institutional ownership, I would think there will be a lot of pushback that will keep this deal from getting done at the current price.  Will ALY up their offer?  I sure hope so.

Holding for now...

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