OpTree

USANA’s bid to go private is OVER. Gull Holdings, the group led by Myron Wentz, the founder of USANA announced that they are terminating their offer to purchase the outstanding shares and take the company private.  

After losing a battle Monday that halted the bid from moving ahead, Gull was essentially forced to terminate their plans. In addition to the latest loss in court, the offer has been rejected by a specially appointed committee as well as many of the minority shareholders. It became clear to Gull and Wentz that they would not be able to secure the 90% percent of USANA shares needed to complete the offer.

Wall Street had a negative reaction to the news sending the stock down almost 13% to $24.43 in a much higher than trading day.

Gull and Wentz made the original offer of $26 dollars on May 13 and then raised it to $28 dollars on June 30th after the initial offer was rejected. Unfortunately the latter offer did not satisfy minority shareholders or the USANA board.

We have been following this story extensively and have always felt that while the intentions were good, the process in which Wentz and Gull went about the deal was poorly executed.  Aside from the  original bid being way too low, the ensuing lawsuits and standing by the offer even after the independent counsel rejected it made no sense at all. It also ddidnt help Wentz/Gull that economic conditions have only gotten worse since the original offer. Now, hopefully, Wentz can go back to spending time running the company and building even greater shareholder value.  Somewhere in the background you can almost hear Barry Minkow gearing up for another assault on the company. 

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Monday was the big hearing for USANA as a hearing was held to determine whether the bid to take USANA private could be halted temporarily. Unfortunately, a judge removed all media from the hearing.

Third District Judge John Paul Kennedy granted the request which was made by the layers for USANA, and the lawyers for Max Silberman, a minority shareholder who is opposed to the bid to take the company private.

Kennedy issued a statement saying, “All sides feel this [hearing] very well might make reference to confidential matters,” “They have objected and would like the press to be excluded, and so I am going to acquiesce,”

According to court reports, Kennedy eventually granted the injunction blocking the buyout, although the official court docket did not explain why the decision was made. Apparently an investment advisor testified that they value of the company was somewhere in the range of $29 to $32 dollars, slightly above the Wentz’ offer of $28 dollars. I’d be eager to know what the”investment advisor”used as a measurement guide to determine the valuation. From our own estimates, USANA should actually be closer to $38-$40 based on similar valuations in the sector.  I dont believe Wentz’s offer is even close nor does it represent the best value for the shareholders however, given the state of the market and the economy, Wentz could make an argument that the future of the stock given these conditions may actually deteriorate.  The problem is Wentz seems to be his own worst enemy by expressing just a few weeks ago that he is ”pleased to see the company’s revenue stabilize given the challenging business environment and the continuing third party allegations affecting public companies within the direct selling industry.”

Lawyers for both sides declined to make comments on the hearing. The lawyer for USANA said that because the company is public, SEC regulations state that they cannot comment until all parties make a public disclosure. I’m guessing that will be in the next day or two.

The Salt Lake Tribune was extremely upset about being kicked out of the hearing, and has reportedly filed a motion opposing exclusion from any further hearings.

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In the latest news in the ongoing battle to take USANA private; a judge has scheduled a hearing next week to hear arguments about whether or not the proposed buyout of the nutrition company should be halted to protect the interests of the company’s minority shareholders.

The hearing is set for Monday the 14th which is the same day that the newest $28 dollar per share offer proposed by the majority owners a few days ago, is set to expire. The majority shareholders, let by USANA founder Myron Wentz, controls 68% of the shares.

Several minority shareholders have filed suit against the company claiming that the offer is too low and that the Wentz group are withholding information about the current and future value of the company. One minority shareholder, Max Siberman of Ohio, has won a motion to expedite the process of interviewing those involved in the bid proposal and discovering of evidence.

So, it will be another week before we hear anything, but we will keep you posted on any updates.

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Gull Holdings’ newest amended offer to take USANA private, was apparently not well received by the board. After initially rejecting the $26 dollar bid a month ago, the board now feels that the amended offer, made by the Wentz family, through Gull Holdings is also not in the best interest of the company or the minority shareholders.

The board has asked the shareholders to reject the amended offer saying that it is “inadequate.” Myron Wentz who is also the founder and CEO of USANA, along with his family and others, control around 68% percent of the company.

In a regulatory filings,the company stated that they felt that the bid undervalues both the current shares and the future prospects of the nutritional company.

Apparently, the Wentz family, and Gull, will not be making another offer, saying that the $28 bid was the highest they could go to make the deal finanacially plausible. The Wentz family has also said that they will not consider selling their shares to a third party.

We have absolutely no idea who is guiding Wentz or Gull Holdings on this deal strategy but in over 20 years of being around and involved with public companies, we have never seen a worse attempt at taking a company private than this. Each step seems to be worse then the previous and aside from the negative press Wentz and Gull are receiving, they are creating a lot of friction with their own shareholders - who are equally as important to the company as their distributors. The strategy has been so poorly defined and executed that it amazes us this company has the market cap it does. Lucky for the company it has some great products to market and distributors who support them because they clearly lack the guidance to take this company private in a manner that appeases the masses.

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