Drama returns to Acasta Holdings
Acasta says move in best interest of firm but proposal triggers ‘serious concerns’
TORONTO A former special purpose acquisition company that saw its shares plunge more than 90 per cent despite a host of prominent backers is once again the centre of a drama.
The latest twist for Toronto-based Acasta Enterprises Inc. came Tuesday when a privately held asset manager voiced “serious concerns” about a plan to convert debt held by the company’s recently appointed co-ceos into shares.
Anson Advisors Inc. alleged in a press release that the proposed transaction was being done “at a significant discount to the current market price” of Acasta’s shares, which closed Tuesday at 86 cents.
Anson Advisors is the registered investment manager for Anson Funds, a privately held alternative asset management company that says it owns or controls around 18.7 per cent of Acasta’s Class B shares.
Acasta Enterprises — which first launched in 2015 as a SPAC backed by ex-magna International Inc. executive Belinda Stronach and the late railroad legend Hunter Harrison, among others — announced the planned conversion last Friday, when its shares closed at 91 cents.
In a release, Acasta said WFI Inc., an entity indirectly controlled by Acasta’s co-ceos, Charles Wachsberg and Richard Wachsberg, had agreed to convert nearly $4.8 million in high-yield, secured debt into Class B shares of Acasta.
Acasta said it would issue to WFI around 6.5 million Class B shares at a deemed price of nearly 74 cents per share.
The company said in the release that, after receiving independent legal advice and considering alternatives, its independent directors had determined the move was in the best interests of Acasta and that it would help improve its financial position.
“The Corporation remains focused on streamlining operations, reducing expenses and is examining a number of alternatives to recapitalize its balance sheet and enhance shareholder value,” Acasta’s release said, adding that, subject to approval by the Toronto Stock Exchange, the conversion was expected to be completed on or after Feb. 18.
Anson’s press release, however, alleged that it “believes that the intent and effect of the debt conversion transaction proposed by the Wachsbergs is to transfer value from Acasta and its minority shareholders to themselves.”
The change in leadership at Acasta was announced last year in a press release published at around 9 p.m. ET the Friday before Christmas. According to the release, Acasta’s then-board of directors and interim chief executive officer had stepped down following a disagreement on strategy between the board and two of the company’s major shareholders, the Wachsbergs, who own approximately 36 per cent of Acasta.
New directors then joined the board, which appointed the Wachsbergs as co-ceos.
The Wachsbergs co-founded the only business that Acasta still owns, Toronto-based consumer products company Apollo Health and Beauty Care.
Anson noted that Acasta had been considering a sale of Apollo before the board was replaced last December.
“Had the Apollo sale proceeded on the terms proposed, there would have been sufficient cash resources to repay all of Acasta’s debt in full and provide value to equity holders of at least $1.48 per share,” Anson said in its release.
Acasta announced its acquisition of Apollo and two other businesses in Nov. 2016, with the purchase price for Apollo pegged at around $390 million. At the time, Acasta said up to 63 per cent of the price was to be paid with using its own common shares.
Since then, Acasta has gone through financial turbulence that has seen the company — which once said it “expects that its evolution will be analogous to that of other prominent private equity managers such as Brookfield Asset Management or The Blackstone Group” — sell off two of its three acquisitions and its stock price fall from $10 to below the one-dollar mark.
After the exit of the then-board last year, much, if not all, of the company’s original leadership team is now gone.
On Tuesday, Anson said its concerns about the proposal to convert Acasta’s debt into equity include that the proposed transaction is a 20-per-cent discount to the current market price.
The proposed transaction would boost the Wachsbergs’ holdings of Acasta to nearly 42 per cent from 36 per cent, the release noted, “giving them effective control in light of historical turnout at shareholder meetings of Acasta.” Anson argued there was better third-party financing available.
Acasta had said the transaction was exempt from a rule requiring the approval of minority shareholders. Anson, however, said it was requesting that the Toronto Stock Exchange step in and require that Acasta obtain disinterested shareholder approval as a condition to moving ahead with the proposed deal.
Acasta also announced on Friday that it had appointed a new chief financial officer and that, in connection with a cost-cutting initiative, was changing auditors.
Anson declined to comment further on Tuesday, while Acasta did not respond to requests for comment.