TORONTO, Oct 29 (Reuters) – Cossette Inc (KOS.TO), Canada’s largest homegrown advertising agency, on Thursday urged shareholders to wait until its board reviewed a sweetened takeover offer from a North American private equity group before tendering their stock.
Cosmos Capital Inc, made up of U.S. and Canadian investors, late Wednesday said it would make a all-cash, fully financed bid of C$5.25 a share for the company, valuing Cossette at C$88 million ($82.2 million).
That’s 6 percent higher than a Cosmos proposal in July for C$4.95 a share, an offer Cossette rejected as inadequate.
“Cossette recommends that its shareholders defer making any decision until its board of directors has had an opportunity to fully review Cosmos’ expected offer, compare it to the results of its strategic review process and make a formal recommendation as to the merits of that expected offer,” the Quebec City-based company said in a statement on Thursday.
After Cossette’s statement, its stock surged nearly 4 percent to C$6.03 per share after trading down for most of the day.
Cossette barred Cosmos from reviewing its financial data after the July offer and hired BMO Capital Markets (BMO.TO) to help it find a buyer with a higher offer.
It said last week as many as 10 parties, out of more than 20 that entered its virtual data room, were interested in a possible takeover of the company and were in a new phase of review that was expected to produce bids.
Cossette’s clients include McDonald’s Restaurants of Canada, Bell Canada, General Motors of Canada and Coca-Cola.
All written expressions of interest regarding a potential acquisition of Cossette that were received by the company during the first phase of its strategic review process are financially superior to Cosmos’ intended bid of $5.25 per share,” Cossette said on Thursday.
A BIRD IN THE HAND
On the other hand, Cosmos says its offer is a guarantee, with all the necessary financing commitments.
Cosmos, whose directors include former top executives from Cossette, plans to mail its offer directly to shareholders after expressing “deep concerns” about the board of directors and the company chief executive officer.
A successful bid requires the support of two-thirds of Cossette’s shares.
Cosmos, being advised by Genuity Capital Markets, controls 18.7 percent of Cossette.
It also has a lock-up agreement with Bergundy Asset Management, which holds 11.1 percent of Cossette stock, and Beutel Goodman & Co, with 7.6 percent of the shares.
Cossette, which said it would not comment further on the process until next week, is the world’s 23rd-largest advertising company.
By Pav Jordan
(Editing by Frank McGurty)