A total of 2,912,138 shares of the Truett-Hurst Inc.’s Class A common stock were properly tendered and not properly withdrawn. Because the tender offer was oversubscribed, only 1 million of such shares were accepted from tendering stockholders. These shares were allocated on a pro rata basis (except that “odd lot” holders’ shares were purchased on a priority basis).
The Company has been informed by the depositary that the proration factor for the tender offer is approximately 31.16%. The depositary will promptly issue payment for the shares accepted for purchase in the tender offer and return shares tendered in the tender offer but not accepted for purchase.
The aggregate purchase price for the shares purchased by the Company in the tender offer is $2,400,000 in cash, excluding fees and expenses relating to the tender offer. The purchased shares represent approximately 22% of the Company’s outstanding Class A common stock.
When the company announced the tender offer (BND, 1/14/19) it described the move as a way share the proceeds of the sale of the company’s wholesale wine business to Precept Brands LLC for $18.3 million last August.
But more importantly, the company said that “in addition to the primary purpose of providing cash to our stockholders, the Company believes the Offer could reduce the number of the Company’s beneficial stockholders sufficiently so that the Company would consider alternatives to remaining a NASDAQ listed reporting company.”
It said it believes it has fewer than 300 shareholders of record, meaning it can deregister the shares with the SEC. “However, we have a larger number of beneficial stockholders, which could result in eliminating our ability (to deregister) or reinstituting our reporting obligations should all or a portion of those beneficial holders become holders of record.”
Shareholders who don’t tender will “achieve a proportionate increase in (a) their relative ownership interest in the Company … and their relative economic interest,” according to a filing with the Securities & Exchange Commission.
“The company has historically experienced a thin trading market, and expects that the trading market for the (remaining) shares will become even less liquid, particularly if the company decides to pursue alternatives to remaining a NASDAQ listed reporting company,” it added.
Why would it seek to effectively go private? Truett-Hurst ticked off a laundry list of reasons, including “significant cost savings.” In fiscal 2018, it said, it spent $593,087 – 25% of its total administrative costs – “on costs solely related to being an SEC reporting company.” And it expects those costs to soar because it “no longer qualifies as an ’emerging growth company,” and will have greater reporting obligations.
It also cited “the ability to gain greater operational flexibility by being able to focus on long-term growth without an undue emphasis on short-term fluctuations in the market price of our shares.|
As of Sept. 30, Truett-Hurst had $5.5 million cash on hand.