OCPI

[turnipmonster]

what's a 30 day poison pill?

[hawk59]

I don't know, seems like way too much trouble and too much that can go wrong when you consider your upside and the odds your upside scenario occurs. Sniper raised some good points. Doesn't seem like a no brainer at all to me.

[ahnuld]

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what's a 30 day poison pill?

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poison pills are generally regulations put in place my management that would make a takeover very unattractive to the buying company. It was created in the 80's to block against hostile takeovers, but they generally hurt existing shareholders who would benefit from the merger. Stocks drop about 2-3% when management builds in a poison pill.

In this case I think it means that if the issues aren't resolved in 30 days the buying firm would not be able to complete the transaction.

[Scorpion Man]

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[ QUOTE ]
what's a 30 day poison pill?

[/ QUOTE ]

poison pills are generally regulations put in place my management that would make a takeover very unattractive to the buying company. It was created in the 80's to block against hostile takeovers, but they generally hurt existing shareholders who would benefit from the merger. Stocks drop about 2-3% when management builds in a poison pill.

In this case I think it means that if the issues aren't resolved in 30 days the buying firm would not be able to complete the transaction.

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No. It's the opposite. This poison pill expires in 30 days. But as I said before they can renew.

[Scorpion Man]

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I don't know, seems like way too much trouble and too much that can go wrong when you consider your upside and the odds your upside scenario occurs. Sniper raised some good points. Doesn't seem like a no brainer at all to me.

[/ QUOTE ]

Funny. In my book this is as little trouble as it gets. It's a very straightforward thesis and requires very little understanding of underlying business dynamics, which is generally the hard part of investing for me.

I have no idea what "too much can go wrong" means. IF the deal doesn't happen you lose 10% and move on. Which of Sniper's points were most salient in your view?

This will take somewhere between 4-6 months total and likely return 10-20%. That is a terrific return given the downside. I have been involved in situations like these many times...this is one of my favorite setups (although I should be clear that my bread and butter is simple fundamental investing, I still have the flexibility to do special situations like my CHTR converts).

The best investors, IMO, are those that have the flexibility to take advantage of all kinds of pitches in different envrionments -- kind of like being able to hit a fastball, a changeup and a curve. This is one of 10 different ways to make money. When someone throws $100k in front of me I am not going to refuse to deign to pick it up.

[ahnuld]

I just really like the underlying put option value of this company, ie you can always sell it at a fixed price, the liquidation value, which isnt very far below the market value

[Scorpion Man]

[ QUOTE ]
[ QUOTE ]
what's a 30 day poison pill?

[/ QUOTE ]

poison pills are generally regulations put in place my management that would make a takeover very unattractive to the buying company. It was created in the 80's to block against hostile takeovers, but they generally hurt existing shareholders who would benefit from the merger. Stocks drop about 2-3% when management builds in a poison pill.

In this case I think it means that if the issues aren't resolved in 30 days the buying firm would not be able to complete the transaction.

[/ QUOTE ]

Just to be clear. OCPI cannot stop Furakawa from selling to OPLK. The poison pill has nothing to do with this. The poison pill is triggered if OPLK buys any OTHER shares in that time frame. This is why OPLK cannot just tender for the rest of the company at this time. THe dynamics around defusing the poison pill are what I understand the least about this situation.

But I trust my pattern recognition. This deal will happen, higher.

[Sniper]

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If you want to research the deal, read the 4/23 8K filed by OPLK that has the contract they signed with Furakawa. No, I have not spoken to anyone at Furakawa as that would be a waste of time.

Furakawa won't be able to easily break this deal and noone is going to bid for the rest of OCPI once OPLK owns the Furakawa stake. Anyways, it does not matter because that is simply a big upside case and it takes care of itself.

Of course the board might decide to extend the pill..boards do all sorts of things to keep control, 30 days is very little time, and they have already demonstrated a willingness to use the tactic. The language around why they did the posion pill is totally standard and means little, except that they did not say "NFW", which is good. I don't think the 30th day is necessarily an important date, but we will see.

They said they are in the process of putting Woodland Hills on and I have not visited the site. WHo buys it and whether its worth $18, $22, or $27m is totally irrelevant to the story.


Sniper -- I appreciate asking questions, as my intent with this thread was to get a live, interesting idea out there. One of the more important things to learn in investing is what's important. Some of the things you are pointing out are irrelevant to the investment decision here.. i would NEVER NEVER NEVER visit the real estate. Unless I happened to have a preexisting relationship at Furakawa, calling a Japanese company and asking them about this deal would be totally fruitless.

Trying to predict the board's action specifically around the pill is also pretty much impossible IMO.

The key is to understand the motivations of those involved and the tactics available to them.

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I'm asking questions, because you've peaked my interest, and I'm trying to understanding your thinking. It seems like you either sense something or have information that you haven't shared yet, so I will continue to ask questions [img]/images/graemlins/wink.gif[/img]

I asked about the property and mgmt discussion, because you had noted in other threads that this was the type of research that you do.

I also listened to their latest conference call, and reviewed their financial and other disclosures.

Furukawa has 93.3% of the shareholder voting rights, controls the board, and is a key supplier. After taking control of the Furukama shares, Oplink will control roughly 58.1%, so I'm not convinced based on the information I've looked at to date, that there is any way this doesn't happen. Worst case, they can replace the Board and Special Committee. This is from the 10Q...



Furukawa beneficially owns all of our outstanding shares of Class B common stock, which as of March 31, 2007 represented 93.3% voting control over all stockholder issues. The holders of our Class A common stock and Class B common stock have identical rights except that holders of our Class A common stock are entitled to one vote per share while holders of our Class B common stock are entitled to ten votes per share on matters to be voted on by stockholders. The differential in the voting rights of our Class A common stock and Class B common stock could adversely affect the price of our Class A common stock to the extent that investors or any potential future purchaser of our shares of Class A common stock give greater value to the superior voting rights of our Class B common stock. Each share of our Class B common stock will automatically convert into one share of Class A common stock if it is transferred to any entity, other than an entity controlling, controlled by or under common control with Furukawa. In addition, our Class B common stock will automatically convert into shares of our Class A common stock if the total number of outstanding shares of Class B common stock falls below 20% of total number of outstanding shares of our common stock. As long as Furukawa has a controlling interest, it will continue to be able to elect our entire board of directors and generally be able to determine the outcome of all corporate actions requiring stockholder approval. As a result, Furukawa will be in a position to continue to control all matters affecting us, including:

o a change of control, including a merger;
o our acquisition or disposition of assets;
o our future issuances of common stock or other securities;
o our incurrence of debt; and
o our payment of dividends on our common stock.

Three members of our board of directors are also executives of Furukawa. These individuals have obligations to both our company and Furukawa and may have conflicts of interest with respect to matters potentially or actually involving or affecting us, such as acquisitions and other corporate opportunities that may be suitable for both Furukawa and us.

If Oplink completes its recently announced agreement to purchase Furukawa's interest in the Company's outstanding capital stock, Oplink will own approximately 58.1% of our outstanding Class A common stock, and will be able to elect our entire board of directors and generally be able to determine the outcome of all corporate actions requiring stockholder approval. We cannot predict whether, and if so, how Oplink will choose to exercise such control, or how such exercise will impact our business and financial results.

Our exploration of strategic alternatives may not be successful.

We have a Special Committee of our board of directors that evaluates strategic alternatives. The Special Committee, which is comprised of our three independent directors, engaged Bear, Stearns & Co. Inc. to advise it in evaluating strategic alternatives, including a special dividend, share repurchase, strategic merger or sale of the Company. The Special Committee is currently evaluating Oplink's proposal to purchase the Company's remaining capital stock not owned by Furukawa.

We are uncertain as to what strategic alternatives may be available to us or what impact any particular strategic alternative will have on our stock price if accomplished. Uncertainties and risks relating to our exploration of strategic alternatives include:

o the exploration of strategic alternatives may disrupt operations and distract management, which could have a material adverse effect on our operating results;
o the process of exploring strategic alternatives may be more time consuming and expensive than we currently anticipate;
o we may not be able to successfully achieve the benefits of the strategic alternative undertaken by us; and
o perceived uncertainties as to the future direction of the Company may result in the loss of employees or business partners.

[Sniper]

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I just really like the underlying put option value of this company, ie you can always sell it at a fixed price, the liquidation value, which isnt very far below the market value

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ahnuld, as best as I can tell, there are no options traded on OCPI?

[hawk59]

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[ QUOTE ]
I don't know, seems like way too much trouble and too much that can go wrong when you consider your upside and the odds your upside scenario occurs. Sniper raised some good points. Doesn't seem like a no brainer at all to me.

[/ QUOTE ]

Funny. In my book this is as little trouble as it gets. It's a very straightforward thesis and requires very little understanding of underlying business dynamics, which is generally the hard part of investing for me.

I have no idea what "too much can go wrong" means. IF the deal doesn't happen you lose 10% and move on. Which of Sniper's points were most salient in your view?

This will take somewhere between 4-6 months total and likely return 10-20%. That is a terrific return given the downside. I have been involved in situations like these many times...this is one of my favorite setups (although I should be clear that my bread and butter is simple fundamental investing, I still have the flexibility to do special situations like my CHTR converts).

The best investors, IMO, are those that have the flexibility to take advantage of all kinds of pitches in different envrionments -- kind of like being able to hit a fastball, a changeup and a curve. This is one of 10 different ways to make money. When someone throws $100k in front of me I am not going to refuse to deign to pick it up.

[/ QUOTE ]

As it seems to me the straightforward thesis is not based on anything real. For it to work out you have to believe that a) Oplink will be able to buy Furakawa's stake and b) they will choose to buy out the rest of the shareholders at a premium. So for part A you have something to go on: OCPI mgmt instituted a poison pill to prevent the sale from happening, they do not want it to go through. So what are the odds it happens? I don't know but there is a significant chance it does not happen. Part B is something that isn't based on any facts, unless you happen to have heard something from Oplink. You are saying the odds of both these things happening are 85%, when I don't see how it can possibly be close to that.