So Naturade is going to acquire all the assets and operations of Redux?
But Redux owns Naturade ... what is the purpose of this deal?
Redux has about 32.6 million total shares outstanding. Naturade, once the 1-for-6 reverse split is complete, will have about 32.8 million total shares outstanding. Redux owns about 30.2 of the 32.8 million shares in Naturade. When the assets go over to Naturade, Naturade will give shares of restricted stock to Redux as compensation. Once the restriction can be lifted from those shares (I expect it will be about 6 months), they will be distributed to Redux shareholders. Once the deal is complete, Naturade will be renamed "Redux Holdings" and Redux will become something else.
In a nutshell here is what I perceive as happening. For each share of RDXH that we own, we will receive 0.9251 shares of NRDCQ when it is distributed. Additionally, we will continue to own the existing shares of RDXH (and some additional shares of NRDCQ that are held there). I expect that NRDCQ will become competively priced with the current price of RDXH, split adjusted. Once they are roughly equivalents, they should theoretically "trade together" until the assets are over and the shares have been distributed.
Once all of the assets are distributed, the only thing left in Redux will be the NRDCQ restricted shares. Once those shares are distributed in about 6 months (my guess) then the current Redux corporate structure could be used for another company to become public as it will no longer have any assets.
Why do all of this? Well, here is my thoughts. Naturade has just been through bankruptcy and everything there is looking very bright as they have a cleaned up set of financials and they are profitable. Additionally, Naturade is a reporting company trading on the OTCBB. This method provides a swift move for Redux to become a reporting company to the SEC and get all of the corporate assets trading under a single public platform.
For me, as soon as NRDCQ (split adjusted) is within 15% of the value of RDXH, I like RDXH as the investment. Investors in RDXH will receive 0.9251 shares of NRDCQ, with some additional shares to follow when the restriction is lifted. Additionally, it provides a bit of "free diversification" opportunity as the remainder shares of RDXH will most likely be used in a future deal once the NRDCQ restricted shares have been distributed.
I am glad to see that Naturade is doing well. I am also glad to see that Redux Holdings is back on the warpath for acquistions. When I listen to Adam Michelin's interview at CEO Cast (March 24, 2008) I get the idea that Adam is working on some other deals.
I handle IR and Capital Markets Advisory issues for Redux Holdings and they recently authorized an updated Investor Brochure. In this document, Adam discusses a new acquistion target identified only as "Target R". This future component of Redux nearly doubles the top line revenue figure and is right in line of where Adam has historically called his "sweet spot" for deal flow ... companies with revenues in the $30-$50 million range.
Should be interesting to see what happens here as new investors become aware of these stocks. In my opinion, things are certainly pointing in the right direction.
DISCLOSURE: I am a large holder of Redux stock as I assisted Redux in becoming a public entity back in 2006. I continue to work with the Company on IR and Capital Markets Advisory issues and receive compensation for my services.
Monday, March 24, 2008
Friday, March 14, 2008
GWYI - Update
I recently spoke with Tim Consalvi over at Gateway International. Tim just released a letter to shareholders and posted it on their new corporate website. I have reposted the release on my First Capital Investors site as well for your review.
Tim has assured me that they are moving forward in their efforts re-file a Form 10SB with the SEC. While I don't think that the company is going to put a specific date out there for investors to look ahead to, based on the general tone of our conversation, I am "hopeful" that we will see a filing sooner than later, perhaps even by this summer. Gateway operates on a June 30 year end, so perhaps that will have an influence, although I am unsure at this juncture.
A Form 10SB filing would be a welcomed relief and I believe that the guys over at Gateway are genuinely good guys and are trying to do what is right by the shareholders. Tim assured me that he is pressing forward. Having had many face to face meetings with Tim, I believe him.
According to the new Gateway website, http://www.gih-inc.com/, Steve Kasprisin, is apparently still a Director with Gateway, so perhaps there is more to that story than I am aware of. Either way, since he is still an advisor to the company, I am confident that he is assisting in the transition to the new accounting system in whatever way he can. In the event that I jumped the gun on his departure to a new job in my earlier blog and was not accurate in my assessment of that situation, I apologize.
The shareholder report was interesting as it discussed an acquisition that occurred of which I was unaware. Gateway acquired CNC Repos for thier vendor and client base, as well as the existing management. I knew that they had been looking at that firm, but until I saw it in the letter to shareholders, I did not know that the acquisition had actually occurred. I am not sure at this point if CNC Repos was rolled into Elite Machine Tool Company or not, as the acquisition does not show up as a subsidiary under the "Companies" portion of the new site under the Machine and Tools Group section. If I get clarification on that I'll update later.
I think this is a positive step for Gateway as it gets them back on the acquisition roll-up track, which gives Gateway the potential to accelerate its growth beyond typical operation expansions. They have been excellent at doing this over the past 6 years. Had it not been for the acquisitions of Bechler Cams, Inc. and Nelson Engineering, Inc. - two deals that unfortunately did not work out - I think that the other acquisitions would have worked out much better. As it is they have still acquired Eran Engineering, ESK (rolled into Eran), All-American CNC Sales and now, CNC Repos. In their new facility, they certainly have the ability to acquire several more manufacturing firms and roll them right into the new footprint. By the way, I have visited the new facility on 2 occassions. It is very nice, well laid out, and offers HUGE opportunity for growth. Given that this company has average about 50% top end growth each year for the past 5-6 years, I have no reason to believe that they will not continue to keep that record in tact.
I will be keeping in contact with Gateway in the upcoming months and plan to keep a "finger on the pulse" to make sure they continue to move towards their relisting. At this time I am cautiously optimistic and hope that we will have this little gem back to trading publicly over the next quarter or two. For those who have contacted me over the past month and told me of your frustrations, just know that I am staying patient and ask the same from you and let's see if we are rewarded.
Stay tuned!
DISCLOSURE: I worked with Gateway as a Capital Markets Advisor and Investor Relations Consultant from 2003 thru December 31, 2007. However, while they remain a private, non-trading company, I am not under any type of contract at this time. Also for the record, as part of my Private Equity holdings, I own stock in Gateway International Holdings and have clients that own stock in the company as well.
Tim has assured me that they are moving forward in their efforts re-file a Form 10SB with the SEC. While I don't think that the company is going to put a specific date out there for investors to look ahead to, based on the general tone of our conversation, I am "hopeful" that we will see a filing sooner than later, perhaps even by this summer. Gateway operates on a June 30 year end, so perhaps that will have an influence, although I am unsure at this juncture.
A Form 10SB filing would be a welcomed relief and I believe that the guys over at Gateway are genuinely good guys and are trying to do what is right by the shareholders. Tim assured me that he is pressing forward. Having had many face to face meetings with Tim, I believe him.
According to the new Gateway website, http://www.gih-inc.com/, Steve Kasprisin, is apparently still a Director with Gateway, so perhaps there is more to that story than I am aware of. Either way, since he is still an advisor to the company, I am confident that he is assisting in the transition to the new accounting system in whatever way he can. In the event that I jumped the gun on his departure to a new job in my earlier blog and was not accurate in my assessment of that situation, I apologize.
The shareholder report was interesting as it discussed an acquisition that occurred of which I was unaware. Gateway acquired CNC Repos for thier vendor and client base, as well as the existing management. I knew that they had been looking at that firm, but until I saw it in the letter to shareholders, I did not know that the acquisition had actually occurred. I am not sure at this point if CNC Repos was rolled into Elite Machine Tool Company or not, as the acquisition does not show up as a subsidiary under the "Companies" portion of the new site under the Machine and Tools Group section. If I get clarification on that I'll update later.
I think this is a positive step for Gateway as it gets them back on the acquisition roll-up track, which gives Gateway the potential to accelerate its growth beyond typical operation expansions. They have been excellent at doing this over the past 6 years. Had it not been for the acquisitions of Bechler Cams, Inc. and Nelson Engineering, Inc. - two deals that unfortunately did not work out - I think that the other acquisitions would have worked out much better. As it is they have still acquired Eran Engineering, ESK (rolled into Eran), All-American CNC Sales and now, CNC Repos. In their new facility, they certainly have the ability to acquire several more manufacturing firms and roll them right into the new footprint. By the way, I have visited the new facility on 2 occassions. It is very nice, well laid out, and offers HUGE opportunity for growth. Given that this company has average about 50% top end growth each year for the past 5-6 years, I have no reason to believe that they will not continue to keep that record in tact.
I will be keeping in contact with Gateway in the upcoming months and plan to keep a "finger on the pulse" to make sure they continue to move towards their relisting. At this time I am cautiously optimistic and hope that we will have this little gem back to trading publicly over the next quarter or two. For those who have contacted me over the past month and told me of your frustrations, just know that I am staying patient and ask the same from you and let's see if we are rewarded.
Stay tuned!
DISCLOSURE: I worked with Gateway as a Capital Markets Advisor and Investor Relations Consultant from 2003 thru December 31, 2007. However, while they remain a private, non-trading company, I am not under any type of contract at this time. Also for the record, as part of my Private Equity holdings, I own stock in Gateway International Holdings and have clients that own stock in the company as well.
Monday, March 3, 2008
Big Banks: Time to Buy?
I was at a venture capital summit in January where a banking analysts suggested that historically banks are a screaming buy when they can be purchased for less than book value. I tend to agree with that assessment, however, when the book value is constantly being reduced due to significant write-downs as a result of the subprime mess, that theory gets a little muddy.
Now that I have convinced you that banks are not worth looking at due to unknowns, let me confuse you even more by stating that I am starting to think the major risks are out there and the upside is getting better every day. Are we still in a slumping housing market that continues to leave unexposed risk the the investor? Yes. Are we staring a possible recession in the face that could cause things to worsen even more? Yes. Is the sky falling? No.
One thing that most investors would agree on is that banks are in the money business. They are some of the leading experts on how to turn a profit. When the opportunity exists to purchase leading banking instutions at nearly 50% discounts, while raking in 6%-8% dividend yields, smart money gets in and expects to go on a bumpy ride.
My top TWO: Bank of America (NYSE: BAC) and Wachovia (NYSE: WB).
BAC is strategically positioned to do better than their peers once the current cycle of real estate debacle and "flipper depression" is over. They are buying Countrywide on the cheap and in a few years BAC shareholders will reap the benefits. Getting paid 6.2% to ride the storm is not a bad way to spend a couple of years. The stock WILL be higher in the next 24-36 months.
WB is one of my favorite bank stocks. They are well managed, they did a fair job in keeping the Wachovia culture by dropping the First Union baggage to a large degree. Perhaps most intriguing, they currently pay an 8% dividend, so I get paid well while I wait.
There might be more negatives to come in this sector, but neither of these banks is going to go out of business and both should be stronger than their peers when the storm passes.
DISCLAIMER: I have no relationships with either of these banks in any capacity except as a customer and shareholder.
Now that I have convinced you that banks are not worth looking at due to unknowns, let me confuse you even more by stating that I am starting to think the major risks are out there and the upside is getting better every day. Are we still in a slumping housing market that continues to leave unexposed risk the the investor? Yes. Are we staring a possible recession in the face that could cause things to worsen even more? Yes. Is the sky falling? No.
One thing that most investors would agree on is that banks are in the money business. They are some of the leading experts on how to turn a profit. When the opportunity exists to purchase leading banking instutions at nearly 50% discounts, while raking in 6%-8% dividend yields, smart money gets in and expects to go on a bumpy ride.
My top TWO: Bank of America (NYSE: BAC) and Wachovia (NYSE: WB).
BAC is strategically positioned to do better than their peers once the current cycle of real estate debacle and "flipper depression" is over. They are buying Countrywide on the cheap and in a few years BAC shareholders will reap the benefits. Getting paid 6.2% to ride the storm is not a bad way to spend a couple of years. The stock WILL be higher in the next 24-36 months.
WB is one of my favorite bank stocks. They are well managed, they did a fair job in keeping the Wachovia culture by dropping the First Union baggage to a large degree. Perhaps most intriguing, they currently pay an 8% dividend, so I get paid well while I wait.
There might be more negatives to come in this sector, but neither of these banks is going to go out of business and both should be stronger than their peers when the storm passes.
DISCLAIMER: I have no relationships with either of these banks in any capacity except as a customer and shareholder.
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