To be or not to be private. That is the quandary in which Tampa, Fla.-based JLM Industries Inc. finds itself.
The marketer and distributor of performance chemicals and plastics has received a going-private proposal from an investor group headed by its chief executive officer and founder, John Macdonald, and a former director, Philip Sassower. The investor group, which owns 53 percent of the approximately 10 million shares of common stock, is offering to buy the rest of the company for $1.40 a share, or about $65.8 million.
The offer represents a 19.7 percent premium on JLM's closing price June 24 of $1.17. Trading in JLM's shares was halted briefly that day when the announcement was made.
The board has formed a committee of independent directors to review the proposed transaction. By the end of the week, the committee is expected to have hired outside counsel and will begin evaluating the offer, said Ford Pearson, general counsel for JMI.
``It is extremely expensive to remain public,'' Pearson added. ``One of the expenses is complying with Sarbanes-Oxley [Act of 2002]. It is extremely time consuming and expensive to set up a program and get plans in place. The internal procedures will require hundreds and hundreds of hours of manpower.''
The Sarbanes-Oxley Act affects corporate governance, financial disclosure and public accounting. It was born out of the Enron scandal.
The final terms of any transaction will be based on negotiations between the investor group and the special committee. The committee, the board and JLM stockholders then must decide whether to give approval.
The going-private proposal closely follows the resignation of Sassower from JLM's board earlier this month. Sassower said he resigned to avoid the appearance of a conflict of interest as he considered acquiring a controlling interest in the firm. At the time, Sassower said taking JLM private was one of the alternatives he was considering. He also sited JLM's poor financial results and his belief that JLM is undervalued as reasons for his actions.
Although JLM's performance improved in the first quarter - with sales climbing 66 percent to $73 million compared with the year-ago period - the firm still posted a loss of more than $1.1 million. JLM lost a total of almost $15 million from 2000-02, as sales dropped from $434 million in 2000 to $340 million in 2001 and to $241 million last year.
JLM officials cited economic softness and changes in selling prices of acetone and phenol as reasons for the downturn. The company distributes engineering resins and specialty chemicals, along with producing plastic feedstocks phenol and acetone.