The ante has been upped but at least two of the larger shareholders of Collectors Universe stock still don’t believe it’s enough to support acceptance of a buyout deal.
Sean Berger, President of Adirondack Retirement Specialists, which owns over 271,000 shares representing an approximate 2.9% equity interest in CU, is telling his clients he believes the parent company of grading and authentication giant PSA is worth more than the current proposal. Seeking Alpha reported that Pembroke Management, which owns a slightly larger number of shares, also planned not to tender its shares.
“We felt quite strong about the situation, which is why we find ourselves doing this,” partner Stephen Hui was quoted as saying.
On Wednesday, a group headed by entrepreneur Nat Turner, an avid collector, announced it had increased its original offer from $72.25 per share to $92—a total of $853 million. The board of directors at Collectors Universe has approved the deal, but shareholders get the final say.
“We are happy that the group attempting to buy CLCT is now listening to what the market is telling them. It’s the value that we also saw when we started acquiring shares last summer,” Berger told SC Daily Thursday. “The fact that only approximately 4% of shares were tendered at $75.25 speaks volumes in itself. I believe that the D1 group had to raise their offer meaningfully if they were serious about acquiring CLCT.”
Even though Turner’s group indicated it was their final offer, Berger believes if they want the sale to happen, they still need to go higher “to give our clients fair value,” calling the $92 per share price “a bargain.” Based on current revenues and the potential for future growth, Berger believes CU is easily worth over $100 per share.
“We are a fiduciary for our clients. Many of our clients are retirees and widows, and for our clients the difference between receiving fair value for their shares and less than fair value is meaningful.”
Berger also says he has concerns that for those who own shares outside of a retirement account that the tax rate for shares bought less than a year ago “could be significantly higher” if a deal were to close soon.
“There are credible cases to be made that with the company’s growth rate, strong cash position and price increases that have been accepted by consumers, as well as order backlog, and favorable outlook, that the price would be here without the tender offer,” he stated. “ While we want all parties to win, we are representing our clients best interests, and believe it is NOT in our clients best interests to tender shares at this time. We would prefer our clientele maintain ownership in the company as it currently stands, or, failing that, we feel that a much higher offer would be needed to represent fair value for Collectors Universe for our clients.”
After hitting a 52-week high of $91.80 earlier in the day, CU stock (CLCT) closed at $91.65 per share on Thursday. As late as May 22, the company’s stock price was hovering around $20 and had traded below $14 per share at one point before beginning an unprecedented bullish run over the summer.
The company has a market cap of over $830.2 million.