Autobytel Inc’s (NASDAQ:ABTL) board has responded to Trilogy, Inc’s $0.35 per share tender offer, calling it “grossly inadequate” and “unequivocally” recommending that stockholders reject it.
We started following ABTL (see our post archive here) because it was trading at a substantial discount to its liquidation and net cash values and Trilogy had filed a 13D notice disclosing a 7.4% holding. Trilogy has now launched a tender offer for ABTL at $0.35 per share, which is at our estimate of ABTL’s $15.4M or $0.34 per share net cash value, but at a substantial discount to our estimate of ABTL’s $24.3M or $0.54 per share liquidation value. When Trilogy launched its offer, we wrote that we believed that $0.35 per share was only the opening salvo and a higher price was possible if the board terminated the rights plan poison pill. The stock closed yesterday at $0.515, which is a huge 47% premium to Trilogy’s offer price and suggests the market is also anticipating a higher offer. The stock is up 19.8% since we started following it in December.
Here’s the letter from ABTL:
April 27, 2009
Dear Stockholder:
On Monday, April 20, 2009, I received a letter from Trilogy Enterprises, Inc. (“Trilogy”) indicating that Trilogy had launched a tender offer for all of Autobytel Inc.’s (our “Company”) outstanding shares of common stock at $0.35 per share.
Our Board of Directors (our “Board”), in consultation with its legal and financial advisors, has evaluated Trilogy’s offer and has found Trilogy’s $0.35 offer price to be grossly inadequate and unequivocally recommends to stockholders that they reject Trilogy’s offer and not tender their shares to Trilogy.
Our Board also believes that the combination of actions taken by our Company as described below will result in our stockholders achieving significantly more value than the offer made by Trilogy. In reaching its decision to recommend that stockholders reject the Trilogy offer and not tender their shares to Trilogy, our Board considered many factors, including:
• Our Company’s strong balance sheet and current cash and receivables position, noting, in particular, that our Company’s cash position alone is substantially in excess of Trilogy’s offer.
• The initial reaction of the securities trading markets to Trilogy’s offer appears to support our Board’s decision that the offer price is inadequate.
• The recent thorough evaluation of strategic alternatives conducted by our Board, including the possible sale of our Company, which concluded that selling our Company in today’s environment was not in the best interest of maximizing value.
• The indications of interest received and offers from potential buyers for our Company as a result of the sale process.
• Inquiries made to our Company’s financial advisor by other interested parties in response to Trilogy’s offer.
• The reasons for the Board’s decision to terminate the sale process, including:
• The value of our Company’s websites; and
• The value of our Company’s intellectual property, particularly its patents, which resulted in a $20 million settlement with the Dealix Corporation in 2006 and most recently settlements with Edmunds.com, Internet Brands, InsWeb and Lead Point that will provide our Company with valuable content, images, shopping and interactive tools and data for our websites.
• Other strategic alternatives being evaluated by our Board and management team.
• The belief that Trilogy is being opportunist in exploiting a recent extreme price decline in our common stock and use of confidential information about our Company obtained by Trilogy under a non-disclosure agreement.
Based upon the above, our Board recommends that you reject Trilogy’s offer and not tender your shares of common stock for purchase by Trilogy.
In addition, we encourage you to read the enclosed Schedule 14D-9, which provides further details with regard to our Board’s recommendation and discusses the factors that our Board carefully considered and evaluated in making its decision to reject Trilogy’s offer.
If you have any questions, please do not hesitate to contact our information agent, MacKenzie Partners, Inc., at the following numbers: Toll-Free 1-800-322-2885 or at 1-212-929-5500 (collect) or by email at autobytel@mackenziepartners.com.
On Behalf of the Board of Directors,
Jeffrey H. Coats
President and Chief Executive Officer
At $0.515, ABTL has a market capitalization of $23.3M, which is approaching our estimate of its $0.54 per share liquidation value. We’re planning to maintain the position as we believe a higher bid is on the cards and Trilogy will know that it is unlikely to get sufficient acceptances at a discount to ABTL’s liquidation value.
[Full Disclosure: We do not have a holding in ABTL. This is neither a recommendation to buy or sell any securities. All information provided believed to be reliable and presented for information purposes only. Do your own research before investing in any security.]
Greenbackd 
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