The once-dominant recruitment and employment firm received a buyout offer from Dutch staffing agency Randstad Holding Company on Aug. 9. Randstad is offering Monster shareholders $3.40 per share in cash, representing a premium of nearly 23% above the stock's Aug. 8 closing price, for a total deal consideration of $429 million. Shares surged more than 26% on the day of the announcement.
The proposal turned out to be just the beginning of a narrative which would push shares even higher by the month's end. Also on Aug. 9, privately held newspaper owner MediaNews Group (MNG) revealed itself as having acquired an 11.6% stake in Monster over the preceding two months, and it urged fellow shareholders to reject Randstad's offer, citing what it believes to be undervaluation of Monster's assets.
This sparked a series of back and forth open letters addressed to shareholders, issued by Monster's management and MediaNews, and as of mid-September, the sparring is still continuing.
MNG has argued that Monster's board and management team conducted the sale in hasty fashion, without a formal auction process. It also asserts that Monster is underselling itself, and could increase its value by reducing expenses by $100 million to $150 million, selling off underperforming assets, curbing capital expenditures, and simplifying its product offering.
In rebuttal, Monster Worldwide's executives insist that they've already trimmed operating expenses and capital expenditures to the core, and divested all nonperforming assets worth considering. In the most recent exchange between the companies, Monster's management summed up its point of view as follows: "MNG is not offering Monster stockholders anything for their shares. Instead, MNG, whose ownership in Monster was only established in July and early August of 2016, is asking stockholders to reject an all-cash, premium offer in exchange for the hope that an undisclosed strategy led by their yet-to-be-selected director candidates will deliver significantly greater value sometime in the future."
I cite the above quote not to leave you with the impression that Monster is in the right, but because it so accurately sums up the situation. Shareholders must choose between a hefty, all-cash premium to the closing share price as of Aug. 8, and a possibly higher yet uncertain return, at an indefinite time in the future, promised by an investor who acquired shares only a few weeks ago.
What happens next depends on how convincing a case MNG can make to its fellow shareholders. As an operator of newspapers, it doesn't have a long track record of successful activist campaigns in public companies, as do some prominent hedge funds, for example. So shareholders have to determine if MNG is capable of delivering the cost-cutting and operational improvements it posits.
On the other hand, it never hurts to second-guess whether a company should seek further immediate value creation before offering itself up for sale. Stay tuned, as barring a successful challenge by MNG, the Randstad takeover is scheduled to close in the fourth quarter of this year, subject to approvals from regulators.
Asit Sharma has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.