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The Cleaner

A look at the OM Group sale featuring SpringOwl

OM Group is getting taken out by Apollo Group and Platform Specialty Products - with shares up 30% over the last week, not all shareholders are happy. It seems the activist here, FrontFour Capital, is getting a raw deal as well. They went active in January and are getting taken out at a roughly 15% premium from the day it went active. FrontFour wanted cost cuts and buybacks - suggesting the fair value could be $60 a share, versus the current $34 buyout. 

But SpringOwl has come out against the deal, which comes comes as its cohort Cove Street Capital has come out today vilifying the deal

Now, SpringOwl's issues include the fact that it believes OM Group is very close to getting past its operational issues, including:

(i) a value-destructive M&A binge at a cost of approximately $1.5 billion, (ii) woeful historical ROIC and ROE measures versus the Company's Proxy Peer Group over one, three and five-year periods, (iii) lackluster EBITDA margins as compared to the Company's Proxy Peer Group, and (iv) a seemingly bloated SG&A structure.

SpringOwl takes issue with the fact that management did not and has not looked for other buyers. The all-cash deal also means that shareholders won't get to participate in the turnaround of OM Group in the future. Of note - the buyout was signed before FrontFour Capital's two board nominees were announced. On the board right now is a former Apollo partner.