Temple Hotels (TSX: TPH) is finally going to be removed from the public markets for CAD$2.10/share by majority shareholder Morguard (TSX: MRC).
Temple has been the target of a slow motion takeover which, in 2015, was effectively finalized by Morguard by the assumption of its asset management agreement, and repurchase of debt securities. After, they proceeded to raise capital through rights offerings which resulted in Morguard accumulating a 73% stake in the company. An entity associated with Clarke’s (TSX: CKI) Armoyan, owns 17% of Temple and agreed to be bought out by this price.
I said a long time ago I was wondering what the heck Morguard was doing meddling with Temple given Temple’s financial statements – even after injecting a bunch of equity capital, the company still appears to have sub-standard financial metrics. Four years after this slow motion takeover, my thoughts still persist. It’s one reason why I wasn’t exactly looking at the prospect of buying equity at CAD$1.80/pop, which was the trading price it was very thinly trading at for most of this year (heaven forbid if I was forced to participate in another rights offering).
Looks like mostly their Alberta and in particular Fort McMurray hotels are struggling, while other hotels are doing ok.
Even so, quarter over quarter their metrics are improving.
Even their debt is improving.
I think Morguard has a really good deal.
PizzaPizza was also reporting improvements in sales in Alberta, 2 or 3 quarters in a row.
Is Alberta resurrecting from oil bust? 🙂
Rai Sahi is no fool and he’s got a ton of his own money wrapped up in Morguard. He must see something in Temple or he would not have gone down this path.
I did quite well on the TPH debenture(s) a while ago, but will take a haircut on the common that I have been holding for years. What the next step? Can Temple turn down the proposal? Anyone else out there holding TPH?
Sahi is no fool, totally agreed. But looking at the net amount of money he dumped into Temple (noting that Morguard more or less paid down the huge debt previous Temple management had accumulated) right now he isn’t exactly sitting on a profitable position. Putting on my CPA hat, my largest lead suspicion relates to the tax loss situation within Temple (they have managed to accumulate $242 million in unrecognized tax loss assets according to the last quarter). MRC can just throw in a bunch of equity and use the entity as a tax shield. As long as those tax assets are not in the form of capital losses (which would have been wiped as a result of the majority ownership change) MRC is clear to use them in the Temple entity.
Armoyan’s ownership and consent basically guarantees this is a done deal.