TORONTO, Jan. 26, 2016 /CNW/ - Pivot Technology Solutions, Inc. ("Pivot" or the "Company") (TSX-V: PTG) today announced that it has entered into an arrangement agreement (the "Arrangement Agreement") with PTS Holdings Corporation ("PTS Holdco"), a company controlled by a group of investors that includes two of the Company's founders (the "Founder Group"), and PTS Income Corp ("Income Corp"), a special purpose corporation that will receive cash distributions under the terms of preferred securities to be issued to Income Corp by a successor to the Company. Under the terms of the Arrangement Agreement, once all shareholder, court and regulatory approvals are obtained, and subject to the satisfaction of other customary conditions of closing, the current common shares held by Pivot shareholders (the "Common Shares"), other than the members of the Founder Group, will be exchanged for preferred securities (the "Preferred Securities") of Income Corp (collectively, the "Transaction").
Torrent Capital, Inc. ("Torrent") vehemently opposes the proposed Arrangement Agreement between Pivot and PTS Holdco. In short, Torrent believes Pivot's founders are trying to wrestle control of the company for no monetary consideration to the shareholders.
Torrent contacted Pivot senior management and the board on the morning of Thursday January 21, 2016 to request a meeting to discuss alternatives as to how to enhance shareholder value. The proposed Transaction announced today is wildly inconsistent with any course of action we would have deemed appropriate in an effort to do so.
Torrent recognizes that the proposed Arrangement Agreement is beneficial for the Founder Group as they would effectively take control of the company without putting forth any hard dollars in order to do so. What remains questionable is how the Transaction is beneficial to Pivot's real owners, the common shareholders.
Torrent believes that the Transaction vastly undervalues Pivot, which has continued to trade at very depressed multiples on an absolute basis and relative to its industry peers. The discounted share price does not reconcile with the strength of the Company's operations, growth profile or strong financial condition.
Furthermore, Torrent is concerned that the proposed agreement appears to have been based on a relatively brief fairness opinion, with a key assumption that the common shareholders are willing to sacrifice both control in the Company and participation in the upside of the business, in return for an income stream. The lack of a formal 61-101 business valuation leaves many questions unanswered and serves to undervalue the Company and its future upside for common shareholders in the existing capital structure.
Torrent believes this agreement is not in the best interest of Pivot shareholders and that Pivot seems to have entered into the Arrangement Agreement without a proper canvass of what alternatives may be available. Torrent looks forward to working with other stakeholders in order to maximize shareholder value.
Torrent is a Toronto based investment company with a mandate to uncover and invest in companies that are trading at a discount to their intrinsic value. Where applicable, Torrent will actively work with company management in an effort to enhance shareholder value.
SOURCE Torrent Capital, Inc.
For further information: Scott Gardiner, Torrent Capital, Inc., Scott.firstname.lastname@example.org