Monster Worldwide Inc.MWW has issued an open letter to shareholders dismissing the claims made by its largest shareholder, MediaNews that opposed the company's takeover by Randstad.
In its letter dated Aug 9, 2016, MediaNews, while disclosing an 11.6% stake in Monster, urged the other shareholders not to approve the merger as the deal represented "the textbook definition of selling at the bottom." It suggested that Monster should "explore all strategic options, including an auction, a review of business operations and/or a restructuring."
MediaNews claimed that a reduction in expenses by another $100-$150 million, divestment of non-core/underperforming assets and reduction of capital expenditures along with simplification of product offerings could lead to a $6-$8 increase in share price over the next 18 months. The increased share price will represent 76%-135% over Randstad's offer price.
Monster Worldwide has asked shareholders not to trust MediaNews claims as those are full of "inaccuracies". Further, it states that MediaNews is asking shareholders to reject the proposal without any solid alternative. Per the deal with Randstad, Monster's shareholders will get $3.40 per share, representing a 22.7% premium to Monster's closing stock price on Aug 8, 2016.
In addition, Monster stated that the possibility of a further cut in operating expenses is limited given the already $100 million cost cuts achieved over the last few years. Plus, capex has almost been slashed by half over the last few years and further reduction will affect its ability to aggressively compete for market share. Also, there are no non-core/underperforming assets left to divest.
MONSTER WWD INC Price
Monster has asked shareholders to consider the fact that the landscape is now dominated by bigger companies with better capital resources and that its competitive position can only be improved through continued investment. But since it operates in a "low growth environment", margin will be under pressure for a long time. Randstad, which is the one of the world's largest staffing firm, should provide it with ample capital to grab a bigger share of the market. The company said it will further elaborate in a detailed filing soon.
On Aug 9, 2016, Monster Worldwide announced that Amsterdam-based, Randstad will be acquiring its assets for about $429 million or $3.40 per share in cash. Following the acquisition, Monster will likely function as an independent entity. The transaction is expected to close in the fourth quarter of 2016.
We believe the deal with Randstad should be in Monster's favor. Monster has been struggling to revive its business for a long time now. The company has been seeing persistent weakness in its transactions business in key regions like North America and Canada. Even its re-branding and cost-cutting initiatives yielded little results as evident from the last reported quarter's results. This has been well reflected in the Zacks Consensus Estimate for the current year, which has gone down from 21 cents to 5 cents over the last 30 days.
At present, Monster carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the same space include Asure Software, Inc. ASUR , Bitauto Holdings Limited BITA and GrubHub Inc. GRUB . While Asure Software sports a Zacks Rank #1 (Strong Buy), Bitauto and GrubHub carry a Zacks Rank #2 (Buy).
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