MONTREAL, July 27 /CNW Telbec/ - O'Leary Funds Management LP ("O'Leary Funds") confirms it will not accept the offer by Boralex Inc. ("BLX") for all of the issued and outstanding trust units ("BPT.un") of Boralex Power Income Fund ("BPT"). BPT unitholders HAVE NOT approved the transaction. The BLX press release yesterday only referred to approval by the company trying to acquire BPT.
We will not tender BPT.un because we believe that:
1. owning BPT represents a better investment providing an excellent yield
(above 8%) which is mostly non-taxable since BPT has a valuable tax
2. the BLX proposal would only provide 6.75% yield and fully-taxable,
resulting in less than 3.5% yield after tax for many investors; and
3. as a result, taxable investors accepting the offer, or forced into the
transaction, would likely suffer a loss of roughly half their after
We do believe that the offer may be improved in a simple and attractive manner, as follows:
1. Valuation. An improvement can be paid by special cash distribution by
BPT, likely tax free. The amount should be determined such that the
total value for selling the business is at least 9x cash flow,
comparable to similar public companies and asset acquisitions. We note
that BPT has retained cash estimated at approximately $20 million and
has the ability to generate additional cash from bank loans.
2. Convertible Bonds or Cash. Investors who do not want the trading price
risk of the convertible securities offered by BLX, should be offered
cash, while banks who believe the convertible securities can be placed
at par value can handle that financing for BLX to generate the cash.
Another simple alternative would be for a third party to acquire both BPT and BLX, in our view avoiding the inherent conflict of interest that many investors believe has led BLX to pursue a process designed to benefit BLX to the detriment of BPT and its unitholders.
SOURCE O'Leary Funds Management LP
For further information: For further information: Connor O'Brien, Chief Executive Officer, O'Leary Funds Management Inc., Chief Investment Officer, Stanton Asset Management Inc., (514) 849-0064 ext 224, firstname.lastname@example.org