Trilogy, Inc’s $0.35 per share tender offer for Autobytel Inc (ABTL) expired yesterday without Trilogy purchasing any shares. Trilogy has sent a letter to the board saying that it will “continue to evaluate [ABTL's] business, its cash position, and its operating performance” and has called on the board to communicate to its shareholders the break-up value of Autobytel, such that shareholders can determine if that is the best course to maximize value.”
We started following ABTL (see our post archive here) because it was trading at a substantial discount to its liquidation and net cash values and Trilogy had filed a 13D notice disclosing a 7.4% holding. Trilogy had also launched a tender offer for ABTL at $0.35 per share, which was at our estimate of ABTL’s $15.4M or $0.34 per share net cash value, but at a substantial discount to our estimate of ABTL’s $24.3M or $0.54 per share liquidation value. When Trilogy launched its offer, we wrote that we believed that $0.35 per share was only the opening salvo and a higher price was possible if the board terminated the rights plan poison pill. The board rejected the offer out of hand and Trilogy did not make a further offer before the initial offer expired. The stock closed yesterday at $0.46, which is at a substantial premium to Trilogy’s offer price and suggests the market may be anticipating a second offer. The stock is up 6.8% since we started following it in December.
Trilogy’s letter to the board of ABTL on the expiry of the offer is set out below:
We have reviewed Autobytel’s response to our recently expired tender offer. We are disappointed in Autobytel’s categorical refusal to engage us in discussions that may result in improving shareholder value. You have made it clear that you are not willing to negotiate. Given that, we elected not to increase our tender offer price and allowed the tender offer to expire unchanged.
In addition, we find Autobytel’s accusation that we have used confidential information in conjunction with our tender offer to be wholly irresponsible and baseless. It is difficult to comprehend Autobytel’s objective in making such an accusation.
We have noted that the Board believes the break-up value of Autobytel is “substantially in excess of the offers made…during the sale process”. We ask that the Board communicate to its shareholders the break-up value of Autobytel, such that shareholders can determine if that is the best course to maximize value.
We further note that Autobytel’s stock traded approximately 7 million shares during the tender offer. This is significantly in excess of normal trading volumes and provides evidence that shareholders do want liquidity.
We will continue to evaluate your business, its cash position, and its operating performance. We have noted your views regarding your cash position. We do agree that maintaining and growing cash from operations is important.
The automotive business continues to announce bad news daily. Dealerships are consolidating and the viability of key manufacturers is uncertain. We believe that now is the time for Autobytel to preserve as much shareholder value as possible. We cannot negotiate if the Board is unwilling. Accordingly, we elected not to extend our offer.
Disclosure: We do not have a holding in ABTL. This is neither a recommendation to buy or sell any securities. All information provided believed to be reliable and presented for information purposes only. Do your own research before investing in any security.