supporter

JDA's Retrade Is Justified

The book/tax differences do have value to an acquiror because there are no limitations on those assets under a change in control. ITWO's strategic review committee called this fact out on their May 2008 update call. The NOL usage has an annual limitation of the Treasury rate multiplied by the purchase price of the company. So in this case, if JDAS purchased ITWO for $345m and the treasury rate is 5%, then it could use $17m a year, which would save JDAS about $6m in cash taxes per year. The JDAS CFO even called the annual cash value of the NOL's on the acquistion cal. So if you are going to continue publishing valuation cases on the internet, please get your facts straight before doing so.


On Nov 10 04:17 PM John Appel wrote:

> - No acquirer would pay for book/tax differences or NOLs because
> they can't use them post-acquisition in a stock purchase deal.
>
> - The market values each of ITWO and JDAS at about 4x EBITDA. IF
> JDAS were willing to pay $11.50/shr for ITWO, it would be a significant
> premium to what ITWO is worth today. I have no idea if JDAS still
> wants to do the deal, or what price they would pay.
> -The 4x EBITDA for ITWO is probably understated because it is based
> on results for the 12 mos ended 6/30. As of that time, sales and
> earnings were trending down, so it would not be surprising if Q3
> is more of the same. Surely JDAS knows what ITWO's Q3 looks like.
> The recent downward revision of the minimum EBITDA covenant on the
> acquisition debt is probably a directional indication. Since JDAS
> had a great Q3 and also reaffirmed its guidance for the full year,
> it seems unlikely that it was the JDAS side of the pro forma EBITDA
> that triggered the need to revise the covenant....