OCPI

[Sniper]

[ 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.

[/ QUOTE ]

I do not believe the bolded part of your statement to be true.

They did not say they instituted the poison pill to prevent the sale from happening. They said the instituted the poison pill to have time to evaluate the impact and review their strategic alternatives.

IMO, this step shields them from shareholder lawsuits based on the fact the majority shareholder could take advantage of the minority shareholders. By taking the time to bring in consultants, who can then review the offer, and offer an opinion on value of the offer, they have looked out for the minority interests.

BTW, the poison pill was not instituted by OCPI mgmt, it was instituted by a Special Committee of the Board, composed of the independent directors.

Based on Furukawa's control, it would seem the odds of A happening is 100%.

[Pokerstuff2]

"Late last month, Oplink (OPLK; Buy) announced that it had
signed a definitive agreement to acquire Furukawa Electric’s
58% stake in OCP for $1.50 per share. OPLK also proposed to
OCP’s board to acquire the remaining 42% of shares outstanding
for $1.50 per share. OCPI subsequently adopted a 30-day
shareholder rights plan to prevent OPLK from purchasing any
OCPI shares until OCP’s board had time to review the offer.
Oplink immediately sued to declare the rights plan invalid. We
do not think OCPI will be able to prevent Oplink from acquiring
Furukawa’s stake, and we expect Oplink to successfully acquire
the remainder of OCPI at or about $1.50 per share. We therefore
see very limited upside to our $1.50 price target, and we maintain
our “Neutral” rating."

So it doesn't look like they can stop OLPK from gaining control of the company. Why Can't OLPK once they have control just disband the non-Furukawa board members and put a stop to any poison pill then acquire the rest of the shares at market value? Even if they don't want the rest of the shares wouldn't the share price go up if OPCI came under new and better management?

[Scorpion Man]

[ QUOTE ]
[ QUOTE ]
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

[/ QUOTE ]


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

[/ QUOTE ]

I am pretty sure Ahnuld was being abstract, not literal, in referencing a "put". I might have called it a floor, but we both see his point.

Sniper -- I don't have info (inside) that I am not sharing. I don't want to wear stripes. I have, however, followed OPLK in the past and spoken to the CEO (way in advance of this deal) and I believe he is very measured and has been looking for a deal for a very long time and will be very focused on getting this done.

You make an interesting point on the researching aspects I have mentioned in the past, such as talking to mgmt. It's an example here of how different every opportunity is...its just that specifically, here, with FUrakawa as a Japanese comapny, there is no way they are telling me anything. On the property, it can't move the calculus enough in one direction or another to merit attention.

[Scorpion Man]

[ QUOTE ]
"Late last month, Oplink (OPLK; Buy) announced that it had
signed a definitive agreement to acquire Furukawa Electric’s
58% stake in OCP for $1.50 per share. OPLK also proposed to
OCP’s board to acquire the remaining 42% of shares outstanding
for $1.50 per share. OCPI subsequently adopted a 30-day
shareholder rights plan to prevent OPLK from purchasing any
OCPI shares until OCP’s board had time to review the offer.
Oplink immediately sued to declare the rights plan invalid. We
do not think OCPI will be able to prevent Oplink from acquiring
Furukawa’s stake, and we expect Oplink to successfully acquire
the remainder of OCPI at or about $1.50 per share. We therefore
see very limited upside to our $1.50 price target, and we maintain
our “Neutral” rating."

So it doesn't look like they can stop OLPK from gaining control of the company. Why Can't OLPK once they have control just disband the non-Furukawa board members and put a stop to any poison pill then acquire the rest of the shares at market value? Even if they don't want the rest of the shares wouldn't the share price go up if OPCI came under new and better management?

[/ QUOTE ]

They can't force minority shareholders to sell to them, hence my reasoning for a premium. Having OCPI public is a pain in the ass and also let's the minority share in long term value creation instead of capturing it for OPLK. THey dont want this thing public.

[Scorpion Man]

[ QUOTE ]
[ QUOTE ]
[ 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 ]


[/ 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.

[/ QUOTE ]
Fine. Then bet me at those odds. You name the stakes.

I have a feeling you haven't been through a lot of M&A. Furakawa is extremely likely to close. THey have an agreement that is not easy to break.

They have already said they want the public stock. They can't get the company at $1.50. Every $0.10 is $5m. The savings from the board and ceo firings more than take care of that on a discounted basis. Its a MASSIVE HASSLE to keep OCPI public. It is in OPLKs interest to do this. If you were CEO you would pay $1.75 for the rest if you had to, and so will they.


To say none of this is "based on facts" is like saying that the projections you have for your stocks you own are "not based on facts", i.e. cannot be known with perfect precision. This is a projection much like the ones you make on EPS for your portfolio companies...actually I have a better chance of predicting this one than you do of predicting company earnings because this is totally within the control of human beings and their actions, while business trends are not. This decision is based on a knowledge of how human beings, corporations, and investment bankers do business.

[Pokerstuff2]

[ QUOTE ]

They can't force minority shareholders to sell to them, hence my reasoning for a premium. Having OCPI public is a pain in the ass and also let's the minority share in long term value creation instead of capturing it for OPLK. THey dont want this thing public.

[/ QUOTE ]

OK so if their plan is to take this thing private then what could be the downside to purchasing shares other than the deal could go away? Even if the deal is gone it's going to be a good time to be a fiber company soon anyway onces the telcos start battling it out. A poorly run company like this looks like such a good value opportunity.

[Scorpion Man]

[ QUOTE ]
[ QUOTE ]

They can't force minority shareholders to sell to them, hence my reasoning for a premium. Having OCPI public is a pain in the ass and also let's the minority share in long term value creation instead of capturing it for OPLK. THey dont want this thing public.

[/ QUOTE ]

OK so if their plan is to take this thing private then what could be the downside to purchasing shares other than the deal could go away? Even if the deal is gone it's going to be a good time to be a fiber company soon anyway onces the telcos start battling it out. A poorly run company like this looks like such a good value opportunity.

[/ QUOTE ]

The company has been a total disaster and burning cash, so owning it outright would not be for the faint of heart. I did the analysis on this one originally at $2 when it was not very far above liquidation...but passed because it was such a sh*tshow. THey did what appears to be a bad acquisition in December...$25m and its killing their results. My sense is that this is a case where new management can make a big dent in the company's performance.

[Scorpion Man]

Sorry to keep bumping this thread, but one final reason I like OCPI...we have had a huge run in the markets, and in all likelihood this stock should not correlate much to the markets (behaving more like an arb). I have been looking for pure "alpha" bets and paring a little long exposure and adding some shorts. This fits that category perfectly.

[turnipmonster]

I haven't thought much about this type of stuff and am pretty much a newbie, but basically you are betting that Oplink will want to buy the 42% of the shares that are still public at some price > 1.50, no?

I realize this is basic but I want to make sure what I just said is correct.

[Newt_Buggs]

[ QUOTE ]
basically you are betting that Oplink will want to buy the 42% of the shares that are still public at some price > 1.50, no?


[/ QUOTE ]
[ QUOTE ]
I think there is a 85% chance the stock is bought out at $1.65-$1.80

[/ QUOTE ]