Register.com Inc yesterday rejected an unsolicited takeover bid that was launched on Wednesday by a group of investors as "financially and structurally inadequate", claiming the potential buyer was trying to pressure the company to sell cheap,writes Kevin Murphy
RCM Acquisition Co LLC's offer of $4.95 cash per share, representing a bid of almost $200m, "does not reflect the significant opportunities Register.com has to grow value for our stockholders," said Register.com executive chairman Mitchell Quain.
Quain added: "By going public with their offer, RCM Acquisition Co hopes to pressure Register.com's stockholders and board into selling at an inadequate price during this inopportune time of market turbulence."
RCM, led by Barington Companies Equity Partners LP, claims it has the support of holders of 4.2% of Register.com's shares. As part of its takeover plan, it wants to completely clean out Register.com's board and select seven new directors.
The firm said its offer represents an almost 25% premium on the average closing price of Register's stock over the last three months and about an 8% premium on the closing price Tuesday, the day before the offer was announced.
But Register.com says that's not enough, given its relatively healthy finances.
The firm had current assets on its September 30 balance sheet of $194.2m, including $74.5m cash and equivalents, $68.8m in short-term investments, and $32.1m in receivables.
The company also pointed out that the RCM offer is "unfunded and expressly states that it is contingent on obtaining adequate financing", and that the offer is also contingent on RCM completing due diligence.
Register.com introduced in October a "poison pill" shareholder rights plan precisely to defend against this kind of takeover attempt. The plan introduces new discounted shares to current shareholders if a company attempts to buy more that 15% of Register.com.
Register.com is one of the largest three domain name registrars. But for the last year it has seen its market share eroded under pricing pressure and has faced other problems, notably very large penalties from credit card processors due to excessive charge-backs.
CEO Richard Forman recently talked of his dissatisfaction with the company's performance, and a restructuring began in November. The company flirted with profitability for a few quarters before sinking back into the red.