We hate A/B stocks. The amount of people who are “entitled” to a Dictatorship of a public company is depressingly less than the reality of how many have it. It’s not hard to grasp. We are hired and fired on the basis of our performance. Why not the people in which we invest?
So Woo-Hoo, we have below a company that as a headline seemed to be doing the noble and rare thing: collapsing the voting shares into the common riffraff shares. A win for shareholders! Huzzahs for management and the Board.
The second read: they are converting at a 1.35 rate. So…if the company was sold for $100 per share, they would get $135.
This is a tangled argument. It is generally accepted that there is generally a premium accorded to “control.” So, the controlling family has some collective corporate history behind demanding a premium for their shares. But that holds up a LOT better if everyone was selling at X premium. Why should they get pre-paid?
I am not one to argue for not utilizing one’s ability to maximize one’s advantage in life in a legal and ethical manner. I think this example falls short. Sell the entire company and work on your premium.
Demerit for MSC management and the board.
MSC INDUSTRIAL CONFIRMS RECEIPT OF PROPOSAL FROM CONTROLLING SHAREHOLDERS TO EXCHANGE HIGH-VOTE STOCK AND ELIMINATE DUAL-CLASS SHARE STRUCTURE
MELVILLE, N.Y. and DAVIDSON, N.C., Feb. 6, 2023 /PRNewswire/ — MSC INDUSTRIAL SUPPLY CO. (NYSE: MSM), “MSC,” “MSC Industrial” or the “Company,” a leading North American distributor of a broad range of metalworking and maintenance, repair and operations (MRO) products and services, today confirmed it has received a proposal (the “Proposal”) from its controlling shareholders, the Jacobson/Gershwind family, to exchange its high-voting Class B shares (10 votes per share) for Class A shares (1 vote per share) and eliminate the current dual-class share structure. The Proposal is that each Class B share be exchanged for 1.35 Class A shares. The Proposal states that the family expects to remain MSC’s largest shareholder, whether or not the proposed transaction occurs.
The MSC Board of Directors has formed a Special Committee composed entirely of independent directors to evaluate the Proposal which will be advised by independent financial and legal advisors. Kirkland & Ellis has been retained as the legal advisor to the Special Committee.
Under the terms of the Proposal, any definitive agreement would first require approval by the Special Committee and the MSC Board of Directors, as well as the holders of a majority of the Class A shares that do not also hold Class B shares. There can be no assurance of the final terms of any transaction between the family and MSC, or that any such transaction will be approved by the Special Committee, the MSC Board of Directors or by the Class A shareholders. MSC does not intend to comment further regarding the Special Committee’s evaluation unless and until further disclosure is appropriate or required.
About MSC Industrial Supply Co.
MSC Industrial Supply Co. (NYSE: MSM) is a leading North American distributor of a broad range of metalworking and maintenance, repair and operations (MRO) products and services. We help our customers drive greater productivity, profitability and growth with approximately 2.2 million products, inventory management and other supply chain solutions, and deep expertise from more than 80 years of working with customers across industries. Our experienced team of approximately 7,000 associates works with our customers to help drive results for their businesses – from keeping operations running efficiently today to continuously rethinking, retooling, and optimizing for a more productive tomorrow. For more information on MSC Industrial, please visit mscdirect.com.
