Tag: CKI

Clarke / Slow-motion privatization

Clarke (TSX: CKI) is George Armoyan’s publicly traded holding company. On September 15, 2020 he owned 10,399,101 shares of 15,697,324 outstanding (66.25%).

Since then, the company has managed to retire 639,432 shares through buybacks and 363,893 of those shares was through a creative 1:1000 reverse split and split, repurchased at $5.60/share on October 20, 2020. Shares outstanding has been reduced to 15,057,892.

As a result, Armoyan’s ownership has risen to 69.1%.

Letko, Brosseau & Associates Inc. owns 2,345,308 shares, or 15.6%.

Thus, the public float available is 2,952,915 shares.

Today, Clarke announced:

HALIFAX, NS , Jan. 21, 2021 /CNW/ – Clarke Inc. (“Clarke” or the “Company”) (TSX: CKI) (TSX: CKI.DB) today announced its intention to commence a substantial issuer bid (the “Offer”) pursuant to which the Company will offer to purchase up to 1,150,000 of its outstanding common shares (the “Shares”) at a purchase price of $7.00 per Share in cash (the “Purchase Price”).

The Purchase Price represents a 6.3% premium over the 30-day volume weighted average closing price of the Shares on the TSX for the period ending on January 20, 2021, being the last full trading day prior to this announcement. The number of Shares subject to the Offer represents approximately 7.64% of the total number of Shares outstanding.

Considering that Clarke last traded today at C$7.04/share (all of 500 shares), I have my doubts whether this offer will be subscribed to any real extent unless if Letko wants to get liquidity on its stake (which will be nearly impossible to unload in the open market).

My impression is that this is a continuation of a slow-motion takeover before Armoyan decides to just buy everything at a modest premium. Maybe the minority shareholder fleas will get another dollar or two out of the stock, but the time for Clarke as a publicly traded entity is soon coming to a close.

Clarke / Terravest spin-off – tax matters

Clarke’s (TSX: CKI) interest in Terravest (TSX: TVK) shares was about 40% of its market capitalization.

Today, Clarke made the decision to spin off the shares to shareholders.

This decision does not come without consequences – for shareholders, they will be paying a tax bill of an increase in income of $5.49 per Clarke share, in the form of an eligible dividend. For non-Canadian holders, this does mean there will be tax withholdings in most cases.

Most holding companies do not do this primarily for such reasons – more movement of capital usually means more taxation. There are a few exceptions – tax-free spinoffs (which require significant amounts of ownership of the company in question), for instance. Inter-corporate dividends of after-tax income is another. Finally, if you are lucky enough to have the capital sheltered in a registered account or TFSA, you’re covered.

Otherwise, when money moves, prepare to pay taxes.

The end of Temple Hotels

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).