World News: 18:30 GMT Friday 11th January 2019. [Stuart Olson Value Committee via Globe Newswire via SPi World News]
NEW YORK, Jan. 11, 2019 (GLOBE NEWSWIRE) -- The Stuart Olson Value Committee, comprised of Crescendo Partners L.P. and Jamarant Capital L.P., announced that it delivered a letter to the Board of Directors of Stuart Olson Inc. (TSX: SOX, SOX.DB.A) today.
The full text of the letter can be viewed below:
January 11, 2019
Members of the Board of Directorsc/o Albrecht Bellstedt, B.A., J.D., Q.C. ChairmanStuart Olson Inc.600, 4820 Richard Road SWCalgary, Alberta T3E 6L1
Dear Board Members,
Crescendo Partners L.P. (“Crescendo”) and Jamarant Capital L.P. (“Jamarant”), collectively the “Stuart Olson Value Committee”, (“We”) or the (“Committee”) have been shareholders of Stuart Olson Inc. (“Company”) since 2010. We initially sent a letter to the Company on October 12, 2018 and requested a private meeting with Albrecht Bellstedt, the Chairman of the Board, and other independent board members. We requested this meeting because we believed, and continue to believe, that Stuart Olson is trading at a significant discount to its intrinsic value and we wanted to share our thoughts on ways in which this value gap may be closed.
During the past couple of months we have had several conversations with representatives of the Board during which time we have expressed our strong belief that the safest, quickest and best path forward was the public announcement that Stuart Olson was commencing a strategic review of alternatives available to the Company. We believe the optimal conclusion would ultimately be a sale of the Company to either a strategic or a financial buyer. We also conveyed our view that an acceptable alternative to the public announcement of a strategic review process included expanding the Board to include a representative of the . Unfortunately, after several meetings, we were not able to reach an acceptable resolution with the Company and we believe that it is best to publicly disclose our historical conversations with the Company as well as to inform the public of our future plans.
The Committee members have significant knowledge and experience working and investing in the engineering and construction industry. Crescendo Partners, a New York based investment management company, has a well-established history of investment success in Canada and the United States, gaining representation on over 25 boards since 1998. Jamarant Capital, also based in New York, was founded three years ago by two Crescendo principals that have been on more than 15 public company boards. In the engineering and construction industry, Crescendo and/or Jamarant have held board representation at Primoris Services Corp, Aecon Group Inc. and Hill International. In addition, we were active in encouraging a sale of Michael Baker International, which was ultimately sold at a premium of over 100%.
We have been investors in Stuart Olson because of its unique focus on the Canadian market, its strong potential free cash flow generation and because of the undervaluation of the stock compared to our estimate of its intrinsic value. Stuart Olson trades not only at a discount to our calculated intrinsic value but also at a discount to its peers. Although we believe that Stuart Olson’s discounted public market valuation does not accurately reflect the Company’s true value, we have grown disillusioned with management and the Board’s ability to close the valuation gap as a publicly traded company based on continued operating performance missteps coupled with continued stock underperformance. For example, the stock performance for the past 1-year, 3-year and 5-year periods (for the period ending 1/10/19) has been terrible at -36.2%, -6.1% and -44.6%. This is compared to the broader TSX Index which has returned –8.5%, +21.0% and +8.9%, respectively.
Currently, comparable public companies trade at 7.1x LTM EBITDA, while Stuart Olson currently trades at only 5.5x LTM EBITDA. Based on our knowledge of the current M&A environment in the E&C industry, we believe Stuart Olson is worth approximately $9.70 per share to a third-party acquirer, implying a ~92% premium to the current share price.
To maximize shareholder value and close the valuation gap, we strongly encourage the Board, in accordance with its fiduciary responsibility, to look at strategic alternatives, specifically a sale of the Company via a competitive auction process. We believe that since Stuart Olson trades at a considerable discount to prices that potential buyers would likely be willing to acquire the company for, both strategic and financial buyers will be interested in acquiring the Company at a significant premium to the current stock price. We believe that now is the best time to explore strategic alternatives for several reasons:
In conclusion, we believe that Stuart Olson has a unique opportunity to sell itself at a very attractive valuation. To accomplish this, the Board needs to act decisively and with a sense of urgency given the factors discussed herein. As such, we urge the Board to do the right thing and implement the necessary steps to maximize value for all shareholders. We believe that both strategic and financial buyers would be interested in the Stuart Olson platform. Stuart Olson is one of the few assets that would be extremely interesting to someone that would like to enter the Canadian market as it is one of the larger construction management companies in Canada and it is exclusively comprised of Canadian business. It has strong exposure to Canadian Infrastructure spending as well as exposure to capital expenditures in the oil sands. We strongly recommend that the Board of Stuart Olson publicly announce the commencement of a thorough review of strategic alternatives immediately.
David D. Sgro
Globe Newswire: 18:30 GMT Friday 11th January 2019
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