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The plot thickens (Meade takeover)

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#1 Starhawk

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Posted 19 June 2013 - 10:02 AM

Two items:

(1) stockholders have launched an investigation into whether Meade management shopped around for the best takeover deal.

SHAREHOLDER ALERT: Levi & Korsinsky, LLP Announces Investigation into Possible Breaches of Fiduciary Duty by the Board of Meade Instruments Corp. in Connection with the Sale of the Company to JOC North America LLC

(2) there is now a second takeover offer:

MIT Capital Inc. Proposes To Acquire Meade Instruments Corp. For $3.65 Per Share In Cash
-$3.65 Per Share Cash Consideration is Superior to the Proposed JOC North America LLC Agreement of $3.45 per share-
-Offer Gives Meade Stockholders Greater Value and Certainty of a Transaction-
-Tender Offer Commences to Expedite Timing of Transaction-
-Combination Creates a Global Optics Company with Meade's Brand for Generations to Come-
 

#2 rmollise

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Posted 19 June 2013 - 10:32 AM

I hope I am wrong...but this is just the sort of thing that can doom the company. :(
 

#3 t.r.

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Posted 19 June 2013 - 10:47 AM

Ya know, sometimes our own economy and laws hinder what's best...I remember when Celestron and Meade wanted to merge, but the government would have none of it. Oh, what could have been! :smirk:
 

#4 mayidunk

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Posted 19 June 2013 - 11:22 AM

I hope I am wrong...but this is just the sort of thing that can doom the company. :(

If they're a private equity firm, then you can probably kiss Meade good-bye if they decide to run it into the ground, and then sell it off piece by piece!

:ohgeeze:
 

#5 Eigen

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Posted 19 June 2013 - 12:02 PM

You obviously know very little of what PE firms do, besides what you have learned from mainstream news sensationalism. There is absolutely no business sense behind acquiring Meade and selling it piece by piece. It would be like buying a Patek Philippe, tearing apart and and selling it off as metal scrap.
 

#6 Jon Isaacs

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Posted 19 June 2013 - 12:18 PM

You obviously know very little of what PE firms do, besides what you have learned from mainstream news sensationalism. There is absolutely no business sense behind acquiring Meade and selling it piece by piece. It would be like buying a Patek Philippe, tearing apart and and selling it off as metal scrap.


In my view, there is really only one business strategy that would make sense. Buy Meade and then sell it to Jinghua Optical. Either that or entice Scott Roberts and crew to walk away from Explore Scientific...

Meade is in dire need of intelligent leadership, someone who knows the market, the hobby and the company...

Meade is not Hewlett-Packard where you can hire a new CEO from a different field to run the company into the ground. You need someone at the help who understands that giant twist up eyecups don't sell but the same eyepiece with torpedo shape is a huge success.

Jon
 

#7 RealSorin

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Posted 19 June 2013 - 12:36 PM

An acquisition seems to be the only way that Meade won't run into bankruptcy, which is now looking increasingly likely regardless. They clearly need fresh leadership and significant reduction in expenses. This from their Annual report on May 30th:

The Company's financial statements for the fiscal year ended February 28, 2013 were prepared assuming the Company would continue as a going concern; however, the Company's declining revenues, recurring losses, weakened financial position and reduced liquidity raise substantial doubt about its ability to continue as a going concern. The Company's board of directors decided in January 2013 that the Company should consider its strategic alternatives to preserve and maximize shareholder value, which ultimately culminated in the signing on May 17, 2013 of the Agreement and Plan of Merger which, subject to shareholder approval, would allow for the outstanding shares of the Company to be purchased for $3.45 per share or approximately $4.5 million.

Due to the Company's declining revenues, recurring losses, limited liquidity and weakened financial position, the Company may not be able to operate long enough execute that planned transaction. Net sales during the three months ending May 31, 2013 are expected to be approximately $3 million, substantially below the net sales of approximately $3.8 million during the three months ended February 28, 2013 and net sales of approximately $4.2 million during the three months ended May 31, 2012. Due to the lower net sales levels the Company is encountering, the Company expects to incur substantial losses during the period through the close of the transaction.

In addition, the Company has limited and decreasing working capital and is finding it increasingly difficult to operate normally. The Company's net debt, which consists of the net balance owed on the Company's credit facility less cash, was $92 thousand at February 28, 2013 compared to $371 thousand at April 30, 2013.

In addition, as is common with public company transactions, a number of law firms are investigating the recently announced merger transaction and may choose to file a lawsuit against the Company in an effort to obtain financial dispensation from the Company. Such actions, or other factors, could cause further delays in the close of the planned transaction and/or result in additional costs. If such events occur, the Company may not have sufficient working capital to operate through the close of the planned transaction. If the Company is not able to obtain additional capital, it may be unable to execute the planned transaction and the Company may then have to file bankruptcy and cease operations.


 

#8 mayidunk

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Posted 19 June 2013 - 12:59 PM

You obviously know very little of what PE firms do, besides what you have learned from mainstream news sensationalism. There is absolutely no business sense behind acquiring Meade and selling it piece by piece. It would be like buying a Patek Philippe, tearing apart and and selling it off as metal scrap.

Meade is no Patek Phillipe, they are a foundering company, and unless these guys are a bunch of "angel investors," their interest in Meade is likely more along the lines of how they can maximize the return on their investments in the shortest amount of time.

Here is an excerpt from an article published on the New Yorker Magazine's website on January 30, 2012 by James Surowiecki, entitled, "Private Equity." I will grant you that, whether or not the following applies in this particular case, remains to be seen. However, this type of "investing" in a company has been seen way too often, the results often being grim for the company they invest in.

The real reason that we should be concerned about private equity’s expanding power lies in the way these firms have become increasingly adept at using financial gimmicks to line their pockets, deriving enormous wealth not from management or investing skills but, rather, from the way the U.S. tax system works. Indeed, for an industry that’s often held up as an exemplar of free-market capitalism, private equity is surprisingly dependent on government subsidies for its profits. Financial engineering has always been central to leveraged buyouts. In a typical deal, a private-equity firm buys a company, using some of its own money and some borrowed money. It then tries to improve the performance of the acquired company, with an eye toward cashing out by selling it or taking it public. The key to this strategy is debt: the model encourages firms to borrow as much as possible, since, just as with a mortgage, the less money you put down, the bigger your potential return on investment. The rewards can be extraordinary: when Romney was at Bain, it supposedly earned eighty-eight per cent a year for its investors. But piles of debt also increase the risk that companies will go bust.

This approach has one obvious virtue: if a private-equity firm wants to make money, it has to improve the value of the companies it buys. Sometimes the improvement may be more cosmetic than real, but historically private-equity firms have in principle had a powerful incentive to make companies perform better. In the past decade, though, that calculus changed. Having already piled companies high with debt in order to buy them, many private-equity funds had their companies borrow even more, and then used that money to pay themselves huge “special dividends.” This allowed them to recoup their initial investment while keeping the same ownership stake. Before 2000, big special dividends were not that common. But between 2003 and 2007 private-equity funds took more than seventy billion dollars out of their companies. These dividends created no economic value—they just redistributed money from the company to the private-equity investors.

As a result, private-equity firms are increasingly able to profit even if the companies they run go under—an outcome made much likelier by all the extra borrowing—and many companies have been getting picked clean. In 2004, for instance, Wasserstein & Company bought the thriving mail-order fruit retailer Harry and David. The following year, Wasserstein and other investors took out more than a hundred million in dividends, paid for with borrowed money—covering their original investment plus a twenty-three per cent profit—and charged Harry and David millions in “management fees.” Last year, Harry and David defaulted on its debt and dumped its pension obligations. In other words, Wasserstein failed to improve the company’s performance, failed to meet its obligations to creditors, screwed its workers, and still made a profit. That’s not exactly how capitalism is supposed to work.


 

#9 belgrade

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Posted 19 June 2013 - 01:15 PM

And how is this related to "Cats and Casses" forum?!
 

#10 mayidunk

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Posted 19 June 2013 - 01:15 PM

You obviously know very little of what PE firms do, besides what you have learned from mainstream news sensationalism. There is absolutely no business sense behind acquiring Meade and selling it piece by piece. It would be like buying a Patek Philippe, tearing apart and and selling it off as metal scrap.

And, yes, you are right! They wouldn't sell Meade off piecemeal. In fact, that's rarely the case! However, by borrowing as much money as they can against Meade's assets, they can still load Meade up with a mountain of debt, and then just leave them, and their workers, in a lurch.
 

#11 mayidunk

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Posted 19 June 2013 - 01:23 PM

And how is this related to "Cats and Casses" forum?!

We stand to possibly lose a company that might still be able to recover, and go back to making affordable telescopes of high quality! If JOC buys them, that may happen. If a PE firm buys them, it may not.
 

#12 rmollise

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Posted 19 June 2013 - 02:44 PM

And how is this related to "Cats and Casses" forum?!


How is it not? ;)
 

#13 Jared

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Posted 19 June 2013 - 03:44 PM

Frankly, I'm unclear how MIT Capital envisions making money on this deal. Break it up and sell of the pieces? Everything but the core business line has already been sold off. They list their expertise in distribution channels and the ability to get Meade into emerging markets as their major value-add, but that doesn't make a lot of sense to me--I don't think any of us see the channel as being Mead's major business issue. Are they just hoping to turn around and spin off to JOC at a higher value than Meade has been able to accomplish on their own? I'm not an M&A expert by any means, but I'm still not sure how they hope to make money on this one.
 

#14 belgrade

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Posted 19 June 2013 - 03:52 PM

I understand Meade's importance for the hobby and I'm all for its survival in any form or ownership which will keep it a company that makes astro-equipment (including "Cats and Casses"). However, I do believe that we either need a separate forum to be established called, for example, "News" or "Manufacturers" or stop reporting in more than one forum (which deals with, frankly, other stuff), whether Meade - or any other business - will/can/should/must survive. Just my 2 cents no one asked for... :p
 

#15 Gil V

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Posted 19 June 2013 - 03:57 PM

C'mon, there are very few threads like this. Certainly not enough for it's own category.

Since I lived through this at Criterion, I'm watching with interest.
 

#16 Starhawk

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Posted 19 June 2013 - 04:02 PM

I haven't cross-posted this subject. This thread is on this forum and nowhere else.

As for why this is here, ask just about anyone who makes SCTs and they will say, verbatim, "Meade and Celestron." Not "Celestron and Meade," or anything else. This chain of events appears to be the beginning of a seismic shift in the hobby and may have profound consequences on cost and availability of related products for many years. And if affects Cats and Casses more than any other area.

If you want a new forum opened for this single topic, email and suggest it to the mods.

In the meantime, please get your facts straight before you accuse someone of breaking the TOS with a multi-forum cross-post.

-Rich
 

#17 Aquatone

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Posted 19 June 2013 - 04:05 PM

I understand Meade's importance for the hobby and I'm all for its survival in any form or ownership which will keep it a company that makes astro-equipment (including "Cats and Casses"). However, I do believe that we either need a separate forum to be established called, for example, "News" or "Manufacturers" or stop reporting in more than one forum (which deals with, frankly, other stuff), whether Meade - or any other business - will/can/should/must survive. Just my 2 cents no one asked for... :p


Really? Meade is one of the most important vendors of Catidioptric telescopes. The implications of their acquisition or demise would have significant implications outside of the brand specific forum. This forum is exactly the place for that discussion. Why try to shut down a civil and informative conversation that all other parties are contributing to with postive intent?

Chris
 

#18 mark379

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Posted 19 June 2013 - 04:14 PM

I wonder if Meade does go bankrupt and disbanded if Celestron would buy the tooling for the 16 and 20 in scopes? Or the f8 system lx600 too? Just a thought...
Your Thoughts?
 

#19 MikeBOKC

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Posted 19 June 2013 - 04:21 PM

I visited last week with someone who is active in the industry but has no connection to any single manufacturer. He said at least five Meade shareholders have already filed suits to block the Jinghua acquisition/merger, which would match the report of a second slightly higher offer. From the language in that annual report it would appear that either Meade gets bought soon or it goes belly up, in which case one supposes its stock, patents and other assets would be tied up in bankruptcy court for some time. With lawsuits now there are lawyers involved, and little good ever comes of that if one expects a rapid outcome. If I was betting I would guess that the Meade product line will re-emerge at some point under one or more alternate brands.
 

#20 Stew57

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Posted 19 June 2013 - 04:36 PM

Meade certainly has some patents that Celestron would want. Not having to press align while an alignment star drifted into position for one. I can't see Meade's technology just vanishing, but the sum of the individual parts may be worth more than the value of the whole.
 

#21 rmollise

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Posted 19 June 2013 - 04:40 PM

Meade certainly has some patents that Celestron would want. Not having to press align while an alignment star drifted into position for one. I can't see Meade's technology just vanishing, but the sum of the individual parts may be worth more than the value of the whole.


Is that part of a Meade patent? Never heard that.
 

#22 Stew57

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Posted 19 June 2013 - 04:49 PM

See 4th post in "Aligning Meades and Celestrons?". I should have been more specific. Sorry for the confusion.
 

#23 rmollise

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Posted 19 June 2013 - 04:53 PM

That post is not correct. The Celestrons worked the same way well before the days of the Meade North and Level lawsuit. That's exactly the behavior of the earliest NS5s and 8s as well as the NS GPSes...
 

#24 Stew57

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Posted 19 June 2013 - 05:03 PM

I never had a Celestron fork, just Meade. I wonder why Celestron doesn't change this. as it seems tracking being on would make it easier to align.

Anyway I am sure there is some valuable Meade technology that other companies would love to scoop up. The question is it more valuable lump sum or piecemeal to the share holder?
 

#25 jrbarnett

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Posted 19 June 2013 - 05:16 PM

Maybe MIT Capital has another buyer already lined up who doesn't want to deal with taking it private or managing a public company. What if, for example, Synta was bidding by proxy through MIT. Let MIT disentangle the company from the shareholders by offering a 20 cent premium, and then transfer to Synta just those assets Synta wants (SCT biz to kill it and strengthen Celestron's position in that segment and Coronado solar, to inject capital for R&D and production cost reduction and bury little Lunt to make a little new money). :thinking:

Going public was the stupidest thing ever for Meade customers. It hasn't been a good deal for shareholders either. It did, however, make the founders rich. Oooh hoo take the money and run! :grin:

- Jim
 






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