Ending a 10-year experiment as a public company, Quebec City-based advertising agency Cossette Inc. is on the verge of going private after management announced it would be acquired by a small private equity firm in Greenwich, Conn.
The agreement with Mill Road Capital LP, which values Cossette at $131.5-million, appears to bring down the curtain on a months-long drama initiated after company founder François Duffar abdicated his position as vice-chairman and president in the spring to launch a friendly takeover bid that quickly turned hostile. The development is a victory for Claude Lessard, Cossette's chairman, chief executive officer and president, who had insisted the proposed takeover by his former partner significantly undervalued the advertising and communications services firm.
Mill Road's offer of $7.87 a share represents a premium of approximately 40 per cent over the recent average trading price, and a 50-per-cent premium over the $5.25-a-share offer made on Oct. 30 by a group of investors led by Cosmos Capital Inc., which is controlled by Mr. Duffar.
Mill Road intends to delist the shares and take Cossette private if the deal is approved by shareholders at a vote planned for Dec. 18.
Since going public at $12.25 a share in 1999, Cossette stock went sideways, and then lost ground to hit a low of $2.78 earlier this year.
In discussing the Mill Road agreement, Cossette spokesman Marcel Barthe agreed that public ownership, "for a communications company in Canada is not ideal," because of the constant pressures to perform in an industry that is perhaps less stable than others. Cossette is the only publicly traded advertising agency based in Canada.
Mill Road, which pitches itself as a Berkshire Hathaway for small companies, has investments in U.S. restaurant chains and nutritional companies, as well as manufacturing, business services, and consumer products.
Cossette said it had reached out to about 125 potential buyers across Canada, the U.S., Europe, and Asia over the last few months before aligning with Mill Road.
Cossette has about 1,485 employees, down from more than 1,600 before the recession, and offices in Quebec City, Montreal, Toronto, Vancouver, Halifax, New York, California, London and Shanghai.
Domestic clients include Bell Canada, General Motors, General Mills, Future Shop and MacDonald's Restaurants of Canada.
COSSETTE (KOS)
Close: $7.78, up $1.93
© The Globe and Mail
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