Fuel Systems Solutions Co-Founder Comments on Continued Significant Concerns Following Westport’s Dismal First Quarter Fina...
16 Mai 2016 - 2:01PM
Business Wire
Beneficial Owner of Approximately 8.7% of Outstanding Fuel
Systems Shares Will Vote AGAINST the Amended Merger Agreement
Westport Continues to Suffer from Deteriorating Financial
Performance with its Share Price Down 44% since the Merger was
Announced on September 1, 2015
Westport has Significant Debt Maturing within Two Years and
Negative Cash Flow from Operations in the First Quarter of 2016,
Demonstrating Massive Risk to FSS Shareholders
Pier Antonio Costamagna, a co-founder of Fuel Systems Solutions,
Inc. (“FSS”) (NASDAQ: FSYS) today issued a statement outlining
significant concerns with the proposed merger between FSS and
Westport Innovations, Inc. (“Westport”) (TSX:WPT / NASDAQ:WPRT)
following disclosure of Westport’s reported financial results for
the quarter ended March 31, 2016. Mr. Costamagna has sole voting
power over 1,576,043 shares of FSS common stock, representing
approximately 8.7% of outstanding shares and he intends to vote
AGAINST the merger at the FSS stockholder meeting scheduled for
Tuesday, May 31, 2016.
“It is stunning to me the FSS Board continues to move ahead with
this merger in light of the consistent and alarming state of
Westport,” said. Mr. Costamagna. “FSS shareholders are receiving no
premium at the current implied offer, which only continues to
decline. Westport, already with significant amounts of debt,
continues to rapidly burn through cash and offers no full year
guidance to shareholders. The standalone value of FSS shows clearly
that FSS shareholders are better suited without the burden of
Westport.”
Mr. Costamagna noted key issues with Westport’s reported
financial results for the quarter ended March 31, 2016 supporting
his intention to vote against the merger.
- SHARE PRICE CONTINUES TO FALL
–Westport’s share price has declined approximately 43% since the
merger announcement on September 1, 2015. The share price fell
almost another 8% following the announcement of first quarter
earnings on May 12, 2016.
- FSS shares - now tied to Westport’s
stock due to the merger agreement - are trading 28% below the share
price one day prior to the merger announcement last year.
- Key valuation methodologies discussed
in J.P. Morgan’s summary of its Fairness Opinion imply that FSS’
standalone value is substantially higher than the current implied
offer price. In particular, the Discounted Cash Flow (DCF) yields a
standalone value of $12.65-17.05 per share.
- ONGOING REVENUE DECLINE - In
first quarter 2016, Westport’s revenue declined 14% year over year,
which is the fourth consecutive quarter of negative revenue growth.
At the same time, adjusted EBITDA fell by 15% year over year and
the net loss increased by 35% year over year. Proof that Westport
remains a cash burning machine, cash and short term investment fell
by $46.7 million or 65% year over year.
- In comparison, FSS will be a
significant contributor but under the Amended Merger Agreement will
receive an inadequate stake in the combined company. Financial
Projections in the proxy statement show that FSS will account for
69% and 56% of combined revenue in FY16 and FY17,
respectively.
- SIGNIFICANT DEBT LOAD MATURING -
Westport has approximately $20 million of Long Term debt that is
due within the next year. It has an additional $21 million of
subordinated debenture notes that mature on September 15, 2017.
These notes bear an interest rate of 9% per annum. With only $24
million in cash on March 31, 2016 (excluding the Cartesian
Financing), and the fact that Westport had negative cash flow from
operations of $23 million during the first quarter of 2016, it is
clear Westport will continue to be in the near future under
considerable financial duress. Given Westport’s precarious
financial situation, it is not surprising but incredibly concerning
that it refuses to provide full year guidance for its business.
- In comparison, FSS has almost no debt
and had $49.5 million in cash and short term investments as of
March 31, 2016.
Mr. Costamagna also reiterated two other fundamental points that
support his intention to vote against the merger.
1. The Cartesian Financing clearly strangles the
future of the combined company.
a. In exchange for $17.5 million cash
(Tranche 1) Westport will be required to pay $46 million to
Cartesian - the minimum fixed payments result in an effective
interest rate of approximately 23%.
b. The FSS board plainly admits that
Cartesian will have significant influence and control over the
combined company.
c. Even with the Cartesian Financing in
place, the companies indicate that the combined entity may have a
NEGATIVE cash balance in 2017.
2. FSS’ split board vote and extraordinary director
actions demonstrate a clear concern over future value of the
combined company.
a. It is now disclosed in the Amended Proxy
Statement that the FSS Board of Directors vote was split on the
Amended Merger Agreement. In fact, deliberations on the Amended
Merger Agreement led to the extraordinary action of a director
demanding the record reflect that pressure was applied to
directors to vote in favor of the agreement.
b. One director (member of the Nominating and
Corporate Governance Committee and the Strategic Oversight
Committee) took another extraordinary step to resign from the board
following this board meeting.
c. Only after this contentious meeting when
the board met without the CEO and the resigned director was the
Amended Merger Agreement approved “unanimously” by directors
present.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160516005853/en/
Abernathy MacGregorPat Tucker / Cia
Williams212-371-5999pct@abmac.com / cew@abmac.com
Fuel Systems Solutions, Inc. (NASDAQ:FSYS)
Historical Stock Chart
Von Mai 2024 bis Jun 2024
Fuel Systems Solutions, Inc. (NASDAQ:FSYS)
Historical Stock Chart
Von Jun 2023 bis Jun 2024