Level 3 Communications was as blunt as possible Monday in a note advising shareholders what to do with an unsolicited offer from TRC Capital Corp: Reject it.
The Broomfield telecom is just weeks away from getting acquired by CenturyLink, the Louisiana internet service firm with major operations in Colorado that offered to buy Level 3 last Halloween for $26.50 and stock for each share. Based on Monday’s share price, CenturyLink is offering $53.99 per Level 3 share.
The TRC offer, however, should have no impact on the CenturyLink acquisition, said Stephanie Walkenshaw, a Level 3 spokeswoman. The note to shareholders was a recommendation to reject the below-market offer.
TRC’s offer for 5 percent of Level 3 is $50.50 per share, or 4.3 percent less than the closing price the day before the offer came in, according to Level 3. Lorne Albaum, TRC Capital’s CEO, did not return a call for comment.
Offering less than CenturyLink, however, is part of TRC’s modus operandi. The Canadian investment firm is notorious for what is called mini-tender offers, garnering headlines like Investing Daily’s “TRC Capital and the Mini-Tender Menace” and The Wall Street Journal’s “‘Mini-tenders’ Bear Investor Scrutiny: Critics Say TRC Capital Catches Investors Off Guard With Below-Market Offers.”
A mini tender is an offer made directly to investors and seeks less than 5 percent of a company’s shares to skirt regulatory disclosures and procedural protections. Often, the mini tender is less than what the stock is valued, causing the U.S. Securities & Exchange Commission to warn investors to be wary about “below-market prices.”
TRC has made such offers repeatedly. A quick search online reveals that in the past 12 months, TRC made low bids for shares in Ionis Pharmaceuticals, Pfizer Inc. and eBay Inc. While many public companies have come out against mini tenders, it is unknown if TRC has been successful in any of its bids.
In Level 3’s case, TRC offered to buy 2 million shares, or about 0.55 percent of the company’s outstanding stock. At $50.50 per share, TRC’s offer is 4.3 percent less than Level 3’s closing price of $52.77 on Sept. 22, the day before TRC made the bid. Level 3’s shares were trading as high as $53.98 on Monday.
Because it’s a low offer, Level 3 said it “recommends that stockholders reject this unsolicited offer or, if stockholders have already tendered shares, that they withdraw their shares,” before the Oct. 25 deadline.
Level 3’s board has already approved the CenturyLink buyout, which is valued at $34 billion. Level 3’s shareholders approved the deal on March 16. CenturyLink needs approval in 23 states and the District of Columbia and Puerto Rico. The deal is waiting on its last approval, from the California Public Utilities Commission, which is expected on Oct. 12. The transaction is expected to close by late October.