Dave Bassel cc: Professor
Thank you for the opportunity to share my analysis with you regarding this most important topic. After giving careful consideration to the SCI offer and analyzing the bid from the view point of all Loewen stakeholders, I believe a rejection of the SCI offer is clearly warranted.
We need to consider the long-term implications this would have on our stakeholders. Would they be better or worse off in the long run? I feel we must analyze the sale of our company from 3 different perspectives.
1) The Bid Itself—Is the bid fair and equitable with regards to compensation for a stock swap?
2) Shareholder Value—What is the long-term impact of the proposed sale on shareholder value?
3) Ethical Considerations—Would this proposed sale violate any specific or implied responsibilities we have toward our stakeholders?
On its face the SCI bid doesn’t seem unreasonable, as it is above our current share price and a melding of Loewen into SCI would extricate The Loewen Group from its immediate need for capital in the aftermath of the Mississippi settlement. However, you don’t need to look too deep to determine that the bid doesn’t offer our shareholders any real premium. SCI’s characterization of its offer as being 49% above where our stock traded 30 days ago is an egregious misrepresentation of the actual substance of the offer. SCI is as aware as anyone that our stock price is only temporarily depressed due to the Mississippi verdict. We could just as easily characterize our stock price as having grown 25% percent over the last month. While the offer is a premium over our current temporarily depressed stock price, the offer amounts to less than a 5% premium over our pre-Mississippi judgment stock price. That valuation was based on the markets analysis of our fundamental ability to grow earnings, and there is no reason to believe our stock price won’t rebound fully