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Posts Tagged ‘trilogy inc’

Autobytel Inc (NASDAQ:ABTL) has filed its 10Q for the quarter ended June 30, 2009.

We last estimated ABTL’s liquidation value at $24.3M or $0.54 per share. Following our review of the 10Q, we’ve reduced our estimate to$21.8M or $0.48 per share. The stock closed yesterday at $0.48, which means it’s trading at our estimate of the liquidation value. On that basis, we’re exiting. We opened our position at $0.43, so we’re up 11.6% on an absolute basis. The S&P500 closed yesterday at 979.62, and was at 899.24 when we started following ABTL in December, which means we’re up 2.7% on a relative basis.

Post mortem

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 had also launched a tender offer for ABTL at $0.35 per share. 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 board rejected the offer out of hand and Trilogy did not make a further offer before the initial offer expired. On expiry of the offer, Trilogy sent a letter to the board saying that it would “continue to evaluate [ABTL’s] business, its cash position, and its operating performance” and called on the board to communicate to its shareholders the break-up value of Autobytel, such that shareholders can determine if that is the best course to maximize value.” That did not eventuate.

ABTL has consumed a great deal of cash over the last years. Its principal sources of liquidity are from proceeds from dispositions of non-core businesses and the patent litigation settlement payments. Our estimate for ABTL’s liquidation value is set out below (the “Book Value” column shows the assets as they are carried in the financial statements, and the “Liquidating Value” column shows our estimate of the value of the assets in a liquidation):

ABTL Summary 2008 6 30

Conclusion

Our position in ABTL has been a disappointing one, and has dragged down the performance of the portfolio. That aside, we can’t be too unhappy with a slightly positive result in a declining company.

[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.]

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Trilogy, Inc’s $0.35 per share tender offer for Autobytel Inc (NASDAQ:ABTL) expired yesterday without Trilogy purchasing any shares. Trilogy has sent a letter to the board saying that it will “continue to evaluate [ABTL’s] business, its cash position, and its operating performance” and has called on the board to communicate to its shareholders the break-up value of Autobytel, such that shareholders can determine if that is the best course to maximize value.”

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 had also launched a tender offer for ABTL at $0.35 per share, which was 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 board rejected the offer out of hand and Trilogy did not make a further offer before the initial offer expired.  The stock closed yesterday at $0.46, which is at a substantial premium to Trilogy’s offer price and suggests the market may be anticipating a second offer. The stock is up 6.8% since we started following it in December.

Trilogy’s letter to the board of ABTL on the expiry of the offer is set out below:

May 19, 2009

Autobytel Inc.

18872 MacArthur Boulevard, Suite 200

Irvine, California 92612-1400

Attention: Mr. Jeffrey H. Coats, President and Chief Executive Officer

Ladies and Gentlemen:

We have reviewed Autobytel’s response to our recently expired tender offer. We are disappointed in Autobytel’s categorical refusal to engage us in discussions that may result in improving shareholder value. You have made it clear that you are not willing to negotiate. Given that, we elected not to increase our tender offer price and allowed the tender offer to expire unchanged.

In addition, we find Autobytel’s accusation that we have used confidential information in conjunction with our tender offer to be wholly irresponsible and baseless. It is difficult to comprehend Autobytel’s objective in making such an accusation.

We have noted that the Board believes the break-up value of Autobytel is “substantially in excess of the offers made…during the sale process”. We ask that the Board communicate to its shareholders the break-up value of Autobytel, such that shareholders can determine if that is the best course to maximize value.

We further note that Autobytel’s stock traded approximately 7 million shares during the tender offer. This is significantly in excess of normal trading volumes and provides evidence that shareholders do want liquidity.

We will continue to evaluate your business, its cash position, and its operating performance. We have noted your views regarding your cash position. We do agree that maintaining and growing cash from operations is important.

The automotive business continues to announce bad news daily. Dealerships are consolidating and the viability of key manufacturers is uncertain. We believe that now is the time for Autobytel to preserve as much shareholder value as possible. We cannot negotiate if the Board is unwilling. Accordingly, we elected not to extend our offer.

Regards,

Trilogy Enterprises, Inc.

Sean Fallon

Senior Vice President

[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.]

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Autobytel Inc (NASDAQ:ABTL) has received a tender offer from Trilogy, Inc. at $0.35 per share. ABTL’s board is reviewing the offer and will advise its acceptence or rejection of the offer “on or before April 24, 2009.”

We started following ABTL (see our post archive here) because it was trading at a discount to its liquidation and net cash value and Trilogy, Inc. had been creeping up the register. Trilogy held 7.4% of ABTL’s outstanding stock prior to launching the tender offer. ABTL closed yesterday at $0.39, which is an 11% premium to Trilogy’s offer price, but still at a substantial discount to our estimate of ABTL’s liquidation value. We estimate that value to be around 38% higher still at $24.3M or $0.54 per share and ABTL’s net cash value to be around $15.4M or $0.34 per share.

Here’s Trilogy’s press release:

TRILOGY ENTERPRISES ANNOUNCES CASH TENDER OFFER FOR AUTOBYTEL AT $0.35 NET PER SHARE

AUSTIN, Texas, April 20, 2009 – Trilogy Enterprises, Inc. (“Trilogy”), a provider of technology powered business services to the automotive industry, today announced that its wholly-owned subsidiary, Infield Acquisition, Inc., has commenced a tender offer to acquire all of the outstanding shares of common stock of Autobytel Inc. (Nasdaq: ABTL) for $0.35 net per share in cash.

The offer represents a 32% premium over the trailing 30-day average closing price of Autobytel’s common stock.

“We are pleased to offer a significant premium to Autobytel’s shareholders, ” stated Sean Fallon, Senior Vice President of Trilogy. “The automotive industry is experiencing an unprecedented decline and we believe that Autobytel must take steps now to ensure its shareholders receive the highest value. Given the significant risks of this business and the Company’s history of operating losses, we believe the premium offered is very attractive.”

“As Autobytel’s second largest stockholder and the beneficial owner of approximately 7.4% of Autobytel’s outstanding common stock, we have studied this business carefully. We have concluded that Autobytel’s ability to execute a turnaround and realize significant value for its stockholders is subject to significant and unacceptable risk. We believe that a high-premium, all-cash tender offer is the most effective way to maximize value for all stockholders. As a result, we have determined it is necessary to take the offer directly to our fellow stockholders in order to deliver significant value to them as expeditiously as possible,” added Mr. Fallon.

“We are confident our fellow stockholders will find that this compelling offer reflects a superior value for their shares, both in light of Autobytel’s current and recent trading history, as well as any realistic near or long term assessment of Autobytel’s prospects. We are committed to completing this offer and remain willing to work cooperatively with Autobytel,” concluded Mr. Fallon.

The tender offer is scheduled to expire at 12:01 A.M., New York City time, on Tuesday, May 19, 2009, unless extended. The tender offer documents, including the Offer to Purchase and related Letter of Transmittal, will be filed today with the Securities and Exchange Commission (“SEC”). Autobytel’s stockholders may obtain copies of the tender offer documents when they become available at http://www.sec.gov. Free copies of such documents can also be obtained when they become available by calling Morrow & Co., LLC, toll-free at (800) 662-5200.

The tender offer was detailed in a letter dated April 20, 2009 from Trilogy to ABTL’s President and Chief Executive Officer, Jeffrey H. Coats, and ABTL’s Board of Directors. The full text of the letter is set forth below:

April 20, 2009
Autobytel Inc.
18872 MacArthur Boulevard, Suite 200
Irvine, California 92612-1400
Attention: Mr. Jeffrey H. Coats, President and Chief Executive Officer

Ladies and Gentlemen:

Trilogy Enterprises, Inc. (“Trilogy”), through its affiliates, owns approximately 7.4% of Autobytel Inc.’s (“Autobytel” or the “Company”) stock and is Autobytel’s second largest stockholder. We have successfully created and delivered innovative solutions to the automotive industry for more than a decade.

We believe Autobytel is facing a crucial period in its corporate existence. The automotive market is undergoing a crisis so severe that it is difficult to adequately describe. Strong companies may find a way forward. Weak companies will undoubtedly fail.

Unfortunately, Autobytel has historically struggled to create an independently viable business. For example:

• In 2006, Autobytel incurred operating losses of $40MM on $85MM in revenue;

• In 2007, Autobytel incurred operating losses of $35MM (not including litigation settlement costs) on $84MM in revenue; and

• In 2008, Autobytel incurred operating losses of $36MM (before impairment charges and litigation settlement costs) on $71MM in revenue, which declined by 15% from the prior year.

Autobytel has itself acknowledged that the market is “extremely challenging” and it expects the U.S. automotive industry to decline more than 20% in 2009. Given the market outlook, what should stockholders reasonably expect from a company that has not proven itself viable historically?

We recognize that Autobytel has taken steps to address this crisis. However, we do not believe the steps taken are adequate to address the severity of the situation. Autobytel facing another corporate reorganization during potentially the worst market in history seems highly unlikely to prevail. The current plan appears akin to “let’s give this one last shot”. Unfortunately, shareholder cash and value is at stake.

Given Autobytel’s business prospects and the significant historical and recent operating losses, the Board should take steps now to preserve as much shareholder value as possible. We believe the only means to accomplish this is the immediate sale of the business.

We are aware that Autobytel had engaged a financial advisor to evaluate the possible sale of the Company. Autobytel announced that its advisor conducted an extensive process which resulted in Autobytel concluding that shareholder value could not be maximized in the current environment. We assume this means no buyer desired to pay a price required by the Board.

Today, our wholly-owned subsidiary has commenced a tender offer that provides stockholders with an opportunity to sell shares at $0.35 per share in cash. We believe this price is likely lower than the share price the Board aspired to obtain during the recent sale process. However, we believe it is a full and fair value for the Company and offers both an attractive premium for stockholders, as well as immediate liquidity for a stock that is thinly traded.

We hereby request that the Board support the proposed tender offer, and in doing so, consider the following:

• The offer represents a 32% premium on the stock’s trailing 30 day closing price;

• The offer provides immediate liquidity for all stockholders;

• The trading volume reported for April is less than 65,000 shares per day, on over 45 million shares outstanding;

• The Company is a sub-scale public company and may not be able to continue to bear the costs and obligations of a public company;

• The Company cannot withstand another shift in strategy during what may be the worst market in history;

• The Company may not be able to continue to bear the costs of its management team, including the lucrative packages offered to its recent hires;

• The Company recently issued executive stock options at $0.35 per share, which the Company must believe is fair value;

• The Company had $32MM in cash in September and only $27MM in December;

• The Company continues to burn cash and is likely to do so for the foreseeable future. It is reasonable to believe that the Company may run out of cash by the end of 2010;

• Without at least breakeven results, stockholder value will only continue to deteriorate until no stockholder value remains;

• Any acquiror must take on the Company’s cash burn and fund the Company in a highly uncertain environment; and

• Any acquirer may have to invest significant additional funds into the Company to make it operationally efficient and competitive.

It is time to stop the erosion in stockholder value. Looking at where Autobytel’s stock price traded a year ago is not indicative of the true value of the Company, but it should serve as a reminder of the value that was destroyed. Autobytel’s management should realistically evaluate the prospects for its business. A candid assessment of that situation should lead management to conclude that an all cash offer at a significant premium to all Company stockholders is in the best interests of the stockholders.

We are pleased to make this proposal to our fellow stockholders. We believe they will find it to be attractive in light of both the Company’s trading history, and a realistic assessment of the Company’s prospects. We are committed to completing this offer and hopeful that we will be able to work cooperatively with the Company in doing so.
We look forward to your timely response.

Sincerely,
Trilogy Enterprises, Inc.

Trilogy’s offer is a little disappointing given that it is pitched at ABTL’s net cash value and at a large discount to its liquidation value. The discount is a direct result of the poison pill adopted by ABTL in 2004. From the most recent 10K:

Preferred Shares Purchase Rights Plan

In July 2004, the Board of Directors approved the adoption of a stockholder rights plan under which all stockholders of record as of August 10, 2004 received rights to purchase shares of Series A Junior Participating Preferred Stock. The rights were distributed as a non-taxable dividend and will expire July 30, 2014.

The rights will be exercisable only if a person or group acquires 15% or more of the common stock of the Company or announces a tender offer for 15% or more of the common stock. If a person or group acquires 15% or more of the common stock, all rightholders, except the acquirer, will be entitled to acquire at the then exercise price of a right that number of shares of the Company’s common stock which at the time will have a market value of two times the exercise price of the right. Under certain circumstances, all rightholders, other than the acquirer, will be entitled to receive at the then exercise price of a right that number of shares of common stock of the acquiring company which at the time will have a market value of two times the exercise price of the right. The initial exercise price of a right is $65.00.

The Board of Directors may terminate the rights plan at any time or redeem the rights prior to the time a person or group acquires more than 15% of the Company’s common stock.

In January 2009, the stockholder rights plan was amended to allow Coghill Capital Management LLC and certain of its affiliates (collectively “Coghill”) to hold up to 8,118,410 shares without becoming an acquiring person under the stockholders rights, subject to various conditions set forth in the amendment, including Coghill’s execution of and compliance with a standstill agreement.

We believe this is the opening salvo in Trilogy’s tender offer, and a higher price is possible if the board terminates the rights plan. We’ll watch the developments with interest.

[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.]

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Autobytel Inc (NASDAQ:ABTL) has amended its stockholder rights plan in response to Trilogy, Inc. increasing its stake to 7.4%. ABTL’s most recent filing attaches the following press release:

Autobytel Inc. (NASDAQ: ABTL) today announced that it has amended its stockholder rights plan to permit CCM Master Qualified Fund, Ltd., Coghill Capital Management, L.L.C. and Clint Coghill to acquire collective beneficial ownership of more than 15% of Autobytel’s common stock without triggering Autobytel’s stockholder rights plan. In connection with the amendment to the stockholder rights plan, Autobytel also entered into a standstill agreement with CCM, Coghill Capital and Mr. Coghill that contains certain standstill provisions and prohibits CCM, Coghill Capital and Mr. Coghill from taking certain specified actions, including, among other things, a prohibition on any actions that would attempt to direct or influence the management, Board of Directors or policies of Autobytel. The standstill restrictions apply for as long as CCM, Coghill Capital and Mr. Coghill collectively beneficially own in excess of 9.7% of Autobytel’s common stock.

Jeffrey Coats, Chief Executive Officer of Autobytel, stated: “Coghill Capital has been a valued long-term investor in Autobytel, and Autobytel appreciates Coghill Capital’s continued support of the Company. Autobytel looks forward to working with all of our stockholders to maximize stockholder value.”

ABTL is up 14% to $0.49 since we started following it in December last year. We see its liquidation value around 60% higher at $35.3M or $0.78 per share.

[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.]

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Trilogy, Inc. has increased its stake in Autobytel Inc (NASDAQ:ABTL). On November 21, 2008, Trilogy, Inc. filed its Schedule 13D notice, declaring an interest of 5.01%. Trilogy, Inc has now filed an updated 13D notice, disclosing an increased 7.4% stake.

We started following ABTL last year because it was a net net stock with a market capitalization of $19.4M at its December 10, 2008 close of $0.43. We estimated the company’s liquidation value some 80% higher at $35.3M or $0.78 per share. Although the stock has risen some 18.6% to close Friday at $0.51, ABTL is still worth 50% more than its stock price indicates so we plan to maintain our position.

[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.]

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The Official Activist Investing Blog has published its list of activist investments for November:

Ticker Company Activist Investor
ABTL Autobytel Inc Trilogy Inc
ACF AmeriCredit Corp Fairholme Capital Management
ACTL Actel Corp Ramius Capital
ADPT Adaptec, Inc Steel Partners
ARCW Arc Wireless Solutions Brean Murray Carret Group
ATSG Air Transport Services Group Perella Weinberg Partners
AVGN Avigen Inc Biotechnology Value Fund
BBI Blockbuster Inc Marlin Sams Fund
BEE Strategic Hotels & Resorts Security Capital Research & Management
BITI Bio-Imaging Technologies Healthinvest Partners
CHG CH Energy Group Inc Gamco Investors
CHIC Charlotte Russe Holding Inc KarpReilly Capital Management
CPN Calpine Corp Harbinger Capital
CRXX CombinatoRX, Incorporated Biotechnology Value Fund
CTO Consolidated Tomoka Land Co Wintergreen Advisers
CWLZ Cowlitz Bancorporation Crescent Capital
DBD Diebold Inc Gamco Investors
DCAP DCAP Group Infinity Capital Partners
DVD Dover Motorsports Mario Cibelli
ENTU Entrust Inc. Empire Capital Partners
FACE Physicians Formula Holdings, Inc Mill Road Capital
FSCI Fisher Communications Gamco Investors
FTAR.OB Footstar Inc Schultze Asset Management
GBE Grubb & Ellis Company Anthony Thompson
GGP General Growth Properties Pershing Square Capital
GSLA GS Financial Corp FJ Capital Long/Short Equity Fund
HCBK Hudson City Bancorp Gamco Investors
HFFC HF Financial Corp PL Capital
INFS Infocus Corp Nery Capital Partners
INFS Infocus Corp Lloyd Miller
ISH International Shipholding Corp Liberty Shipping Group
KANA.OB Kana Software KVO Capital Management
KEYN Keynote Systems Ramius Capital
KFS Kingsway Financial Services Joseph Stilwell
KONA Kona Grill Mill Road Capital
LCAV LCA-Vision Inc Stephen Joffe
LDIS Leadis Technology Inc Kettle Hill Capital Management
LNET LodgeNet Interactive Corporation Mark Cuban
LTM Life Time Fitness Green Equity Investors
MCGC MCG Capital Corporation Springbok Capital Management
MGAM Multimedia Games Inc. Dolphin Limited Partnership
MGI Moneygram Interntaional Inc Blum Capital
MIM MI Developments Greenlight Capital
MYE Myers Industries Inc Gamco Investors
NAV Navistar International Owl Creek
NLS Nautilus Inc Sherborne Investors
NOOF New Frontier Media Steel Partners
NYT New York Times Harbinger Capital
OEH Orient-Express Hotels SAC Capital; DE Shaw
ORNG Orange 21 Costa Brava
PBIP Prudential Bancorp Inc. of PA Joseph Stilwell
PGRI.OB Platinum Energy Resources Inc Syd Ghermezian
PHH PHH Corp. Pennant Capital Management
PNNW Pennichuck Corp Gamco Investors
PPCO Penwest Pharmaceuticals Co Perceptive Advisors
PRXI Premier Exhibitions, Inc Sellers Capital
PWER Power One Bel Fuse
PXG Phoenix Footwear Group Reidman Corp
RDEN Elizabeth Arden Shamrock Activist Value Fund
SCOP Scopus Video Networks Ltd. Optibase Ltd
SECX.PK SED International Holdings Hummingbird Management
SLTC Selectica Inc Trilogy Inc (Versata Enterprises)
SNG Canadian Superior Energy Palo Alto Investors
SNSTA Sonesta International Hotels Gamco
SUAI Specialty Underwriters Alliance Philip Stephenson
SUMT SumTotal Systems Discovery Capital
SUTM.OB Sun-Times Media Group Inc. K Capital
SUTM.OB Sun-Times Media Group Inc. Davidson Kempner Partners
SWWI Simon Worldwide Inc Everst Special Situations Fund
TIKRF.OB Tikcro Technologies Ltd Steven Bronson
TXCC TranSwitch Corp Brener International Group
TXI Texas Industries Shamrock Activist Value Fund
UIS Unisys Corp MMI Investments
UTEK Ultratech Inc Temujin Fund
WBSN Websense Inc Shamrock Activist Value Fund
WEDC White Electronic Designs Wynnefield Capital
WINS SM&A Mill Road Capital
YHOO Yahoo Carl Icahn
ZLC Zale Corp. Breeden Capital Management

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