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Who Wants to Buy Travelzoo?

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"ChaPaVe Partners" is the name, but what's its game?

This morning, this previously unheard of firm announced a "tactical tender offer" for 1.5 million shares of Travelzoo (Nasdaq: TZOO  ) . The news sent the shares rocking 9% higher in pre-market trading, but professional market watchers expressed skepticism. Commenting on the $40-per-share offer, The Benchmark Co.responded "Are you kidding me? ... We have never head of ChaPaVe Partners and ... this offer may be bogus."

That's a curious comment from an analyst that recommends buying Travelzoo stock up to $60 -- but I think Benchmark is on the mark. As the analyst points out, Travelzoo's supposed acquirer only created a company website two weeks ago. Prior to that, ChaPaVe was apparently a nonentity. More importantly, its "offer" may not be much of an offer at all.

According to the terms of its press release, ChaPaVe "plans to commence" its tender offer "subject to certain conditions." Right off the bat, this tells us the offer isn't in effect yet. As for the conditions, they're vague:

  • "We encourage all 150 institutional investor shareholders to add to their holdings in order to reduce the number of shareholders as part of our tactical strategy." (So what happens if all 150 institutional shareholders don't play ball?)
  • "ChaPaVe will meet with Travelzoo's management and board of directors in order to complete due diligence." (Travelzoo's response: "We have not had any contact with this company and cannot comment.")
  • "Another condition is that ChaPaVe obtains a financing commitment no later than October 18th, 2011, subject to possible extension." (And if it doesn't, the firm would have no commitment to buy anything, much less pay $6 more than Travelzoo's current share price.)
  • "ChaPaVe may choose not to move ahead ..."

Do tell...

Foolish takeaway
ChaPeVe's supposed offer isn't quite as shareholder-unfriendly as the "mini-tenders" that Canada's TRC Capital has run in the past, trying to buy shares of name-brand firms like Pfizer (NYSE: PFE  ) , Abbott Labs (NYSE: ABT  ) , and General Electric (NYSE: GE  ) on the cheap. To the contrary, ChaPeVe seems to be making a tactical feint at a takeover, in hopes of boosting the value of shares it already owns (incidentally benefiting other shareholders in the process). If you're a Travelzoo shareholder, you might want to send the folks at ChaPaVe a thank-you note (assuming they've had time to rent a P.O. Box yet).

Just don't expect anything to come of their "offer."

What's the next step in this alleged attempt to buy Travelzoo? Add the stock to your Fool watchlist, and find out.

Fool contributor Rich Smith does not own (or short) shares of any company named above. The Motley Fool has a disclosure policy. The Motley Fool owns shares of Abbott Laboratories. Motley Fool newsletter services have recommended buying shares of Abbott Laboratories, Pfizer, and Travelzoo. Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Read/Post Comments (3) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 09, 2011, at 4:24 PM, jproche277 wrote:

    Mr. Smith....

    How can you say that "as a TravelZoo Shareholder" I should send a thank you note to those guys when they would make an offer at 40 usd ?".

    Today's highest were about 34.3 if I remember, very far from the fair value of the company.

    However this ridiculous go private offer come right after an "analyst" lowered its price target sending the stock down 7% or so. Minus seven percent and plus 9% ? somebody made a quick buck indeed.

    Did they pump up the price ? no because Travelzoo share price is at the lowest since even before the August mini storm on the market and a third of its highest price....

    This offer is certainly bs but only to the short term profit of an obscure person or group of person.

    Travelzoo shares are worth minimum double the current share price and this non event will only have entertained some medias.

  • Report this Comment On September 10, 2011, at 1:51 AM, phoebe44 wrote:

    As if 9/9/11 Goldman Sachs rates TZOO a buy with a target price of $75.00 -- look for a class action suit if this offer is real and closes. Certainly not in the best interests of the stockholders -- TZOO has been over $100.00 per share in the not too distant past - surely this is some joke!

  • Report this Comment On September 10, 2011, at 8:55 PM, Glycomix wrote:

    Travelzoo must have some managerial inefficiencies: They make a 92% gross profit, but have only a 7% operating margin and have a -1.2% profit margin. In that sense, this strange tender-offer sounds reasonable.

    However, it doesn't make sense that the Travelzoo CEO would say, "I've never heard of this company" if this offer was for real. The offer had been made public, so there's no secrecy requirement.

    This offer seems to be a scam to manipulate stock prices. To avoid charges of fraud the principals put a smokescreen of qualifiers out. They may also have gotten some bank support to con the SEC.

    It is senseless to make a buyout offer without contacting the management team, except in the case of a hostile takeover. In this case a hostile takeover is impossible. Insiders own 51% of the company.

    Sarah Lee was bought out by private interests, as have other landmark companies. However, the investors spoke to management first. They'd have to get their ducks in a row before making the deal public.

    What's the motive? To move the stock price dramatically in a predictable fashion? Did any one investor or investment group make significant perfectly-timed calls then puts on TZOO?

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