OpTree

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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USANA appears to be now be facing a second lawsuit in response to its proposal to take the company private.

Max Silberman, a shareholder who lives in Ohio is accusing the family of Myron Wentz of undervaluing the company’s stock. Silberman feels that the $26 per share offer greatly underestimates the value of the stock as well as future value of the company. The suit also claims that the Wentz family is concealing information about the true value of the stock and the company.

The purpose of the suit, is to halt the further purchase of shares by the Wentz family, who currently own 68% of the nutritional supplement company.

Silberman is hoping to get the suit -class action status so that it can represent all of the remaining minority shareholders. A previous and similar lawsuit filed by two other shareholders is currently pending in the 3rd district court. That suit too, alleges that the Wentz family is not being forthcoming about the current or future value of the company and is undervaluing the stock. The previous suit is also looking to gain class action status.

Neither USANA nor the Wentz family has released any comments about either lawsuit. The Wentz family remains firm with their offer of $26 even though that number has been unanimously rejected by a committee hired by the board to review the offer. Not only is the Wentz family standing firm on that number, they even made the same offer twice.

The Wentz family’s goal to take the company private in order to eliminate having to deal with legal issues and lawsuits seems to be backfiring. They seem to be causing more harm then good for themselves not only by making a ‘low ball” offer, but by making the same offer twice. Now, instead of re-evaluating their offer, and raising the bid, they’ve made the remaining shareholders so angry, that they now have two new lawsuits on their hands; two lawsuits that within the week could become class-action suits. Maybe the family should take a look at the company and the stock, which has been doing fairly well, and review their original goals when they decided to go private. Just so people are aware, it is not uncommon to see these types of lawsuits pop up. Shareholders who dispute either valuations or when a stock suddenly drops significantly will start these actions in an effort to get others to jump on board. At the end of the day, they typically serve as more of a distraction than anything else - something USANA doesn’t need more of right now.

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