The investment group that owns 55% of BlueLinx Holdings extended today by one week the expiration date of its offer to buy all other outstanding shares and take the Atlanta-based distributor private. Cerberus ABP Investor LLC (CAI) did so after a special committee of the BlueLinx board of directors notified stockholders that it hasn't been able to decide yet how to respond to the $49.6 million offer.
CAI's offer had been scheduled to expire at midnight ET on Aug. 27 and now will expire at midnight ET on Friday, Sept. 3. The price offered for BlueLinx shares--$3.40--remains the same. BlueLinx shares rose as high as $3.64 today before closing at $3.39.
"The extension of the offer was made at the request of the special committee," BlueLinx said. "The special committee today notified the stockholders of the company that it has determined that it is unable at the current time to take a position with respect to the offer. The extension will thus provide the special committee with additional time to develop its position or recommendation, if any, with respect to the offer."
CAI, a unit of Cerberus Capital Management L.P., filed its tender offer on July 21 and launched it on Aug. 2. BlueLinx provides products from more than 750 suppliers to 11,500 customers nationwide. It reported on Aug. 5 a net loss of $3.4 million for the second quarter, swinging from a year-earlier profit of $600,000. That loss occurred despite a 27.7% increase in revenues to $540.8 million.
Today's news comes three days after the owner of 5% of the shares BlueLinx filed a complaint in Delaware Chancery Court seeking to stop CAI's move, arguing its $49.6 million tender offer values BlueLinx far too cheaply. BlueLinx actually is worth at least seven times the $3.40 per share price that CAI is making in the tender offer now under way, Stadium Capital Partners (SCP) argued. (Story)
SCP based its judgment on BlueLinx management projections that 1.3 million housing starts in 2014 would enable the company to post revenue of $4.37 billion and EBITDA (earnings before interest, taxes, depreciation, and amortization--a popular measure of cash flow) of $170.5 million.
"These EBITDA levels are similar to what the company achieved in its 2004 and 2005 fiscal years, during which years BlueLinx was consistently valued in the range of approximately 6.5x to 9.5x EBITDA," SCP's complaint said. "Employing this range of 6.5x to 9.5x EBITDA multiple and BlueLinx's projected 2014 EBITDA of $170.5 million results in a total enterprise value of $1,108 million to $1,620 million. Deducting the company's projected 2014 net debt of $318.4 million results in an equity value of $790million to $1,301 million, or approximately $24.16 to $39.78 per share -- i.e., more than 7.1x to 11.7x the current $3.40 per share offer price." BlueLinx's real estate assets alone would be worth 1.6 to 2.6 times the $3.40/share offer if that real estate was put on the books at its appraised value, SCP argued.