Enad Global 7 stock jumps after US activist investor pushes for sale (updated)
23/05/2023 12:34
(Adds statement from company in paragraphs 5 through 7)
By Svea Herbst-Bayliss
NEW YORK, May 23 (Reuters) - Enad Global 7 AB's EG7.ST
stock price jumped 5% on Monday and climbed further on Tuesday
after U.S. activist investor Alta Fox urged the Swedish video
game company to explore strategic options, including a possible
sale.
Alta Fox asked EG7's board to "expeditiously" address the
company's trading discount and forecast that a sales process
plus other changes "could unlock more than 100% in near-term
upside for EG7 shareholders," according to a letter made public
on Monday.
Alta Fox, which owns 6% of EG7 and made headlines last year
by running a board room challenge at toymaker Hasbro HAS.O , is
worried the market is not valuing the company properly despite
positive steps taken by management.
"EG7 is a high-quality business that remains dramatically
undervalued due to no fault of current leadership," Alta Fox's
managing partner Connor Haley wrote.
On Tuesday, EG7, which has game development divisions
Daybreak Games and Big Blue Bubble, said it proposed to refresh
its board as part of its commitment to help improve the share
price. It did not give details.
The company said it expects to see strong revenue growth
over the coming five years in part because of tactical decisions
made by management last year.
"We agree with your sentiment and concur with many of
your suggestions and have considered and will continue to
consider numerous approaches to further unlock shareholder
value," the company said in a public response to Alta Fox's
letter.
Previous management's missteps and the fact it is not well
known outside Sweden are hurting the company, the letter said.
Alta Fox expressed confidence in EG7's current management team.
The hedge fund suggested the company, whose stock is listed
on the Stockholm Stock Exchange, should relist in the United
States to buy back shares. It also suggested management should
promise to pay a recurring dividend, saying the company could
pay "a 10%+ dividend on the current share price while still
properly reinvesting and maintaining a net cash balance sheet."
Most urgently, Alta Fox wants to see a formal review
process, including a possible sale of the entire company, which
it expects could attract several potential acquirers willing to
pay a considerable premium.
($1 = 10.56 Swedish crowns)
(Reporting by Svea Herbst-Bayliss; Editing by Conor Humphries
and Chizu Nomiyama)
((svea.herbst@thomsonreuters.com; +617 233 2138; Reuters
Messaging: svea.herbst.thomsonreuters.com@reuters.net))