Will you please explain the proposed strategic combination? Looks like if every unit holder tendered their shares for $37, then I'd receive $37 for 30% of my shares and 1 share of the new company for the remaining 70%?
If all unit holders (except me) elected to convert their shares to the new company, is it possible to receive $37 for 100% of my shares?
What is your recommendation?
The offer allows a unitholder to choose to receive $37.00 in cash for each unit they hold, or they can choose to receive one common share in the new company, A&W Food Services NewCo. The slight caveat is that if the total cash elected by all unitholders exceeds or is less than $175.6M, the cash distribution is prorated so that only ~32.5% of the outstanding units are purchased for cash at $37.00 per unit.
Theoretically, if every unitholder tendered their shares for $37, then it is likely a holder would receive $37 for 30% of their shares, and their remaining shares would be converted 1:1 in the new company.
If all unitholders (except for one) elected to convert their shares to the new company, that individual is likely to receive $37 for 100% of their shares, since the total cash consideration would likely be less than $175.6M.
We feel this merger cleans up the structure and it looks like the right move. This transaction can save royalty fees and overall allows investors to participate in the company's growth and valuation upside, while still seeing strong yields. We feel that for investors that liked this name before, they should like it more now. If investors are focused on income, we would be OK with electing 100% shares.