The struggle between shareholders of Jerusalem-based Internet company Answers Corporation (Nasdaq:ANSW) continues to heat up. Last Sunday, private equity fund Outboard Investments, which owns 8.8% of Answers, notified the US Securities and Exchange Commission (SEC) that it was not happy with the price at which Summit Partners unit AFCV Holdings LLC was to acquire Answers. Outboard said that it might increase its stake in Answers and/or link up with a third party to submit an alternative offer.
Yesterday, it became apparent that Outboard is not alone in the fray. In a filing with the SEC, Osmium Partners stated, "AFCV Holdings' recent offer to acquire Answers Corporation is grossly inadequate. Osmium believes that Answers.com’s business is materially undervalued by the stock market as a going concern, and that AFCV Holdings’ offer does not come close to representing fair value." Osmium owned 5.1% of Answers at the date of the announcement, and has subsequently increased its stake to 6%.
In short, Osmium agrees wholeheartedly with Outboard Investments, which means that they both believe that Answers is worth much more than $127 million, the value that AFCV gives the company.
Osmium says that that it may link up with one or more shareholders and/or executives (including directors) to buy more shares in Answers. It may even seek to replace the company's board of directors.
In other words, the struggle for control of Answers, a small and not especially successful Israeli company (at least according to its financial figures), is heating up, and becoming more interesting with each passing day.
Answers' share price closed at $10.74 yesterday, giving a market cap of $86 million. AFCV wants to acquire the company at $10.50 per share. Answers developed a website that answers almost every possible question, and is considered one of the top ten websites in the US.
The struggle between the two camps of shareholders could become interesting, if only because Answers' two largest shareholders, RedPoint Ventures and founder, chairman and CEO Robert Rosenschein, have already given AFCV their voting rights in the company on the basis of the acquisition agreement.
Another filing with the SEC three days ago states that AFCV already owns 27.2% of Answers' voting rights (but not its capital), which it acquired from RedPoint and Rosenschein. Osmium and Outboard Investments own 14.8% of Answers' voting rights, which gives AFCV the upper hand at the moment.
Published by Globes [online], Israel business news - www.globes-online.com - on February 17, 2011
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