Monday, December 11, 2006

Calls of Note Part 4

- Merrill Lynch notes that Alpharma's (NSYE:ALO) recent SEC filings suggest that ALO may be seeking to purchase the class B shares that are currently held by A.L. Industrier ASA (ALI), an entity controlled by former Chairman Einar Sissener. ALI owns 11.9mn shares (22% of outstanding shares), which have supervoting rights and allow ALI to elect a majority of Board members. If ALO can purchase the B stock at reasonable terms, investors could view the event favorably because it 1) would likely be accretive to EPS, and 2) could make it easier for ALO to explore strategic options for its businesses, if it chooses to do so.

Firm analyzed scenarios in which ALO would purchase the B shares at current market price, a 5% premium, and a 10% premium. In these cases, assuming an estimated 4.6% interest rate on cash, the EPS accretion in 2007 could be 15%, 14%, and 13%. Some sort of premium could be justified by the fact that the Class B shares allow the holder to elect two-thirds of Board members and have supervoting rights (4 votes per share) in any non-class shareholder vote.

As the firm indicated in their recent note, the Analyst Meeting on 12/13 could be relevant for the stock if management announces actions that could enhance shareholder value. It is possible that management will discuss, among other strategic priorities, this share class issue.

Notablecalls: Merrill made a nice call on ALO on Dec 4 (see archives) and I would not be surprised to see further buy interest ahead of the analyst meeting.

No comments: