An auto-parts company from India is making an unsolicited and unusual takeover overture for TV production company DHX Media Ltd., saying it is offering to buy the owner of the Peanuts and Teletubbies brands at a 300-per-cent premium to where its stock was trading.
Sakthi Global Holdings said in a news release that it is making an “unsolicited merger proposal” for Halifax-based DHX priced at $5.32 a share, with $1.32 to be paid in cash and $4 to be paid in Sakthi stock, which is thinly traded on the U.S. over-the-counter (OTC) market.
DHX shares closed on Tuesday at $1.96 on the Toronto Stock Exchange, up 9 per cent from the previous day but well below the Sakthi offer. The stock traded at $2.28 early in the session. At Tuesday’s close, DHX’s market capitalization was $290-million, while the Sakthi offers values DHX at $718-million.
In response to Sakthi’s early morning news release, DHX put out its own release on Tuesday that said: “At this time, Sakthi Global Holdings has not responded to questions from DHX Media and DHX Media has not been able to verify the ability of Sakthi Global Holdings to carry out a transaction.”
Halifax-based DHX said its board of directors will review any formal offer for the company, but cautioned: “There can be no certainty that a transaction will take place with Sakthi Global Holdings or any other party.”
DHX’s board held a formal strategic review last year that included potentially selling the company, and concluded that process in September after selling a minority stake in the Peanuts cartoon brand to Sony Music Entertainment (Japan) Inc. for $235.6-million. DHX properties also include shows such as Strawberry Shortcake, Caillou, Inspector Gadget and the Degrassi franchise
“The whole approach of Sakthi appears unusual to us,” said analyst Aravinda Galappatthige at Canaccord Genuity Group Inc. in a report on Tuesday. He listed five major obstacles to a deal, including foreign ownership restrictions on Canadian media companies, a lack of capital at Sakthi needed to fund the $180-million cash portion of the bid, and an OTC-listed Sakthi stock that is “not a reliable currency” for the $4-per-share stock component of the offer.
Sakthi’s release describes the company as a manufacturer of car chassis and powertrain components with a US$1.2-billion market capitalization. The company’s announcement of the DHX bid was riddled with spelling mistakes and grammatical errors: The potential buyer said if the takeover is successful it will see “Sakthi Global shareholders emerging as the majority shares [sic] holders of the combined companies.”
Phone calls to Sakthi’s U.S. office in Bethesda, Md., went to a voice mailbox that was full and could not accept messages.
In the past, foreign entities have occasionally broached the idea of taking over Canadian companies, then fade away in the face of scrutiny from boards of directors, financial advisers and regulators. In 2016, infrastructure firm Gibson Energy Inc. hired bankers and lawyers to deal with an unsolicited offer in the form of a letter from an entity that billed itself as a Singapore-based private equity firm, only to see the potential bidder fall silent.