In a presentation for shareholders released after close of market April 1, EnergySolutions used plunging graphs and dire language to make the case for shareholders to approve its proposed sale to Energy Capital Partners for $3.75 per share. Chart after chart in the presentation illustrates how EnergySolutions stock has “significantly underperformed” compared to peer companies, that earnings estimates have shrunk consistently over time, and that should the deal be voted down, “macro and company challenges [will] create substantial risks for standalone entity.” Shareholders must vote on the deal by April 26, and majority approval is required. Though some investors have argued that $3.75 per share is not a high enough valuation—EnergySolutions stock was $23 during the 2007 IPO, and many analysts estimated it was worth between $4 and $5—the company wrote in its presentation that, “The transaction provides a cash payment today beyond what could be expected under management’s risk-adjusted go forward business plan, given the substantial macroeconomic and operational risks faced by the company as a standalone entity.” EnergySolutions also pointed out that ECP’s valuation of the company stands up favorably to other recent transactions in the industry, including CB&I’s recent acquisition of Shaw.
EnergySolutions used the Magnox rebid to highlight its uncertain future. Currently the company’s contract to manage the UK’s Magnox nuclear power stations represents the company’s single most important driver of cash flow, but the current contract expires in 2014, and no fewer than four other groups of companies are competing for the rebid of the contract, EnergySolutions told shareholders. The company’s teaming partner, previously reported to be Bechtel, will cut into the cash flow by taking a 60 percent share if the re-bid is won, “resulting in a sharp revenue decline,” and the teaming partner may decide to quit its team with EnergySolutions if the merger with Energy Capital Partners is not approved, the presentation states.
See the presentation here.
Analysts for Wedbush have agreed with EnergySolutions’ evaluation, telling subscribers in a March 31 memo obtained by RW Monitor that shareholders for the company should make like the Steve Miller Band and “Go On Take the Money and Run.” “With no meaningful cash proceeds from the sale of assets or businesses, limited capital market financing alternatives and the lack of growth in cash flow over the next three years, we believe shareholders of EnergySolutions (ES) should vote their proxy in favor of Energy Capital Partners’ (ECP) $3.75/share cash offer,” the firm wrote.
