Author: PLee
Salton (SFPI) is trying to go private by the end of the year. Harbinger Capital owns a combined 94.4% through two different entities and will be executing a short form merger on Dec 7 that doesn’t require shareholder approval. This is possible since they own more than 90% of the stock. Originally they intended to cash out minority shareholders at $0.33 but following upwardly revised growth forecasts following a related acquisition, they have increased the cash out price to $0.75. As with many of these types of opportunities, the incentive is the savings (estimated $1.5-2 million per year) that will accrue from avoiding Sarbox compliance. At the original price the savings “coupon” would amount to nearly 15%. Obviously the savings are less impressive at $0.75, but the odds are good and the deal still makes sense. The big risk right now is that Harbinger, like many hedge funds, is facing a wave of redemptions, but given their overall size ($26 billion I think), the relatively small size of this transaction (less than $50 million) mitigates the impact of the fund’s reduced liquidity.
At $0.60 the current arbitrage spread is 25%.
