Over the Transom
By Mark Lax

Like many public trusts we traded at about seventeen times earnings. When it came to dividends, you
would probably be better off with a CD. Those really interested in a fashionable ROI needed to wait for our
share price to appreciate. Given that we are in flooring, which is tied to housing, which is in the crapper,
you might be growing some cobwebs during the aforementioned wait. Imagine our surprise when an offer
for our firm came in unexpected over the transom.
By over the transom I mean it started as a rumor buried in Chem News which was then echoed the next
day on a Wall Street wrap up program. Despite this, our price moved not an inch, blip, point, decimal or, if
you will, penny. This was followed the next day by an SEC filing and a formal letter. All of this happened
simultaneously with my banging out our careful response.
    
Gosh, we were just minding our own business, but as a publicly traded firm we are always for sale,
even though we aren’t actively looking to be bought out at this time, thank you.
I said that in about
two hundred words or so.

Our suitor was the parent company of our biggest supplier, Resinex, a firm called Imadenture. Why
Imadenture wanted to buy Resinex’s biggest customer is anyone’s guess. The sage of Omaha says buy
when people are running and run when people are buying. Perhaps someone at Imadenture was listening
to this.

Imadenture is basically a chemical company. It’s about twelve times our size. Despite this, it trades at about
the same price per share that we do, the infamous $7.45 level. We have been at $7.45 a share for
eighteen months, as if $7.50 would bring on Armageddon. Their all cash offer is $11.02 a share which
conveniently works out to a cool one billion dollars for a firm which is currently valued at 750 million.

Shouts of “Sell, Clevon, sell!” rang out from our institutional investor pool, who hold about 35% of our firm.
The Clevon in question, our CEO Clevon Wright, was listening in that way that one should to the people
who largely employ you. Just cashing out would most distinctly be vacating his vision for the firm as stated
in a two hour speech just six weeks ago. Shame to waste a two hour speech like that.

Technically, Imadenture doesn’t have the money. One slander against them is that the word ‘debt’ is
literally a part of their name. It isn’t, if you look at it. You might get ‘dent’ but not ‘debt’. Technically, we
shouldn’t care where they are getting the cash, since cash is what they are going to be paying us.
Technically what we should care about is getting eleven dollars and two cents for an item which is currently
stickered at seven forty-five. Obviously, I don’t work in the flooring plants, otherwise my concerns would be
different.

To save you the two hour speech, which I wrote, Clevon’s vision of our future is to expand the types of
flooring that we sell. Originally we manufactured resin based flooring, by which we mean acrylic or vinyl or
linoleum--or plastic, if you like. Eighteen months ago we merged with a maker of ceramic floor tiling. Going
forward, we are saving our pennies, about a billion of them so far, to either buy or start up a hardwood
assembly. We are about half way to where we need to be in order to make a credible stab at it. Although
the approach of paying for expansion with money you actually have has gone a little out of favor, it is
Clevon’s way. Our thinking is that once people go back to building buildings again, we will be able to
expand our share of the flooring market by virtue of having more flooring offerings. All of this was summed
up in the Journal with “Amcov-Petra is a floor coverings manufacturer which is sitting on 100 million in
cash.”

Having one’s plans upended like this does blow big oozing neon chunks, but it’s not the first bump in the
road. Merging with the ceramic tile firm got us Dutch. Dutch is the only actual person who sits on our
board. Everyone else is a custodian or representative of a pool of investors. 12% of our firm is owned by
the family of the founder, but they just park Ski-Doos in our warehouses. They don’t haunt the board. Only
Dutch haunts the board, with his owl-like stare and his high pitched yawn of a voice.

Dutch purchased the assets of the ceramic tile company from a bankrupt asbestos manufacturer. He got
the stuff that you could conceivably still make and none of the liability for the harm caused by the stuff that
causes a specific and very traceable cancer.  Then he offered to merge it with us for a mere 20% of our
stock. It seemed like a deal at the time.

It seemed like a deal for Dutch’s heirs. Dutch is pushing eighty. That’s eight times ten or five hundred and
sixty in dog years. Not that we’re sure what kind of animal Dutch is, although he could pass for an iguana.
He fancies himself a bulldog, a guardian, an activist investor. We thought Dutch was done when he
married the thirty year old, but that just seems to have recharged him.

Dutch closed our glad-handing remote corporate office in Rockefeller Center. Dutch closed our wholesale
showroom at the Merchandise Mart. Dutch made us fire all of our secretaries. Because of Dutch we are
looking to let or sell our Zen retreat in Barbados. I hate Dutch.

Dutch treats us all like surfs. His foreshortened torso, garbed in a white shirt two sizes too big and adorned
with the sign of Satan--a string tie--bobs center stage at every quarterly meeting. He wears the type of
glasses that have no rims on their top, but otherwise have thick, black, bat-like frames. When he looks at
Clevon you can almost hear the word ‘boy’ welling up at the back of his Adam’s apple. The other members
of the board, the perpetually cell phone engrossed keepers of other people’s money, have assured
Clevon on more than one occasion that if he should, accidentally, reach over and pop off Dutch’s head,
yank the heart of darkness out of his decapitated cavity, place the oozing thing upon the nice sample tile
treatments  in the board room and squish that sucker flat, most of the potential witnesses to such will be in
no condition to give testimony against him. Although comforting, Clevon has yet to act upon this proposed
initiative.    

As for Imadenture’s proposed initiative, Clevon was as affirmatively resigned as could be expected. He
watched my Power Point break down in utter silence. When the lights came on, his giant chocolate hand
scooped up a quarter pound of sea-salted popcorn. “Wow,” he said, before inhaling his hand, “No more
Dutch.”

Dutch, by contrast, was livid. Under no circumstances are his 20% of our firm interested in this offer. He
insisted that we retract and reword our response to read “As a dynamic and DEBT-FREE enterprise with
core competencies in a non cyclical infrastructure sector, we find the prospect of assumption by a highly
leveraged, bloated and directionless conglomerate without any tangible appeal.” Clevon nixed this on the
adroit technicality that floor coverings are listed as a consumer durable and not an infrastructure
component. But we did reword our initial statement to take out the ‘thank you’ part.

Imadenture’s response: “Frankly my dear, we don’t give a damn. We’re throwing down! Hostile it is, bitch.”
In so many words. They upped their bid to $11.12. Our share price didn’t move, not even on intraday.
Imadenture’s actually went down.

On a back channel, Dutch is wrangling for a seat on Imadenture’s board. But their clown car is full. He also
floats the idea of a stock swap, which somewhere down the line may lead to his gaining a seat on the
board. Everyone but him hates that. No one wants Imadenture stock. Imadenture doesn’t want to play with
their stock: they want fixed assets and they want to lock in for good Resinex’s biggest customer.

In a week Imadenture has 20% of us and the institutional investors have consolidated down to a guy: a guy
who wants $12.00 a share and he will happily turn over 35% of the firm.  That leaves Dutch with a hand full
of air.

A guy, however, is on a rather short leash. He blinks, becomes very non-committal. This gives Dutch an
opening. Dutch starts actively courting the Ski-Doo kids. Although visions of Dutch dying at sea are
dancing in our heads, some of the Ski-Doo kids have gotten to the age where they have some concept of
the future.

Dutch’s plan, such as it is, is to pony up our one hundred million on five hundred million worth of futures in
a hardwood forest. That this somehow gets us into the hardwood flooring business seems to be missing a
step. In short, we throw one billion real pennies and four billion borrowed pennies into the woods in hopes
we get either a return of pennies or a supply of wood. End game: we no longer have cash and now owe
half a billion dollars, which we have partially paid back. It’s a ‘poison pill’ defense. No one will want us if we
owe that kind of money. Sucky, sucky.

D-Day. It’s the board meeting Dutch has triumphantly called.  His gold Bentley is the first to roll through the
gates. ‘A guy’ has now subdivided back into the original custodians plus a few others we have not seen
before. 8% worth of the Ski-Doo crowd shows--in suits and shaved, some for the first times in their lives.
Dutch is in his glory, burning up the phone and running paper tapes, occupying the ten by ten white office
off the board room. Then he stops. The office goes silent.

Fearing that something had happened to Dutch (‘fearing’ perhaps not being the right word at all), I popped
in to check up on him. Dutch’s hands were over his eyes. He was whiter than normal. Per his request, I
summoned his driver. He staggered on out.

We never saw him again.

On the desk in the office was a picture of Dutch’s wife in a flagrantly compromising position with one of the
Ski-Doo kids. It seemed to be freshly removed from a FEDEX mailer.

With Dutch now gone from the meeting he called, the sale to Imadenture was approved.

Comptroller is a position Amcov-Petra needed as an independent firm, but one that a division of Resinex
does not need; and thus I was issued a parachute. Clevon was offered a big something at Imadenture, but
decided to pack up his tent for elsewhere. We both wound up cleaning out our offices at the same time.
Finding Clevon alone in his office, I came in and shut the door behind me. I said “Hiring private detectives
to follow around Dutch’s wife was rather underhanded.”

“I am not that industrious,” Clevon explained. “It was faked. Photo-shopped. It’s not my fault that the guy
wasn’t sure what his wife looked like naked, now is it?”