31.05.2007

Maxim to buy back shares

Maxim Crane Works the world's largest crane rental company that went through a chapter 11 bancruptcy process in 2004 to 2005, has announced today that its board of directors has approved the initiation of a traditional "Dutch auction" tender offer to purchase up to 2.5 million shares of its common stock, and share equivalents

The price the company is prepared to pay will vary from investor to investor – deal to deal but will range from $45.75 to $51 per share. Warrants for common stock will be treated as "share equivalents," allowing holders to tender the underlying shares without needing to exercise the warrants.

The tender will open on Monday - June 4th, and run until June 29th unless extended.

The offer will cover just under 25 percent of the company's outstanding shares and will be financed from borrowings under a new credit facility to be entered into prior to the expiration of the offer.

The auction will work on the basis that the company will buy the shares with the lowest price first. Moving to higher tendered prices until it has purchased 2.5 million shares.

However, if more than 2.5 million shares are tendered below the $51 rate, the company may buy back additional shares.

The tender offer is not subject to any minimum number of shares being offered, but it is contingent on Maxim being able to confirm a new line of credit to pay for them.

Several directors and executives, with 133,714 shares between them, have said that they plan to tender them in the auction.

Vertikal Comment

Maxim announced that it would buy back its shares after having carried out a strategic evaluation of options open to it after emerging from Chapter 11.

This buy back will allow a number of investors caight up in the chapter 11 process to make a swift exit at what most likely looks like a good deal, particularly when viewed from the highly indebted days prior to filing for chapter 11.

It is a little surprising to see such a large portion of directors and insiders holdings to be included in the sale. It might provide a some sort of guidance to other shareholders to take advantage of the tender offer and cash out of Maxim now.

Sadly we do not know at what price the directors will be tendering their shares at. If we did it would tell us a lot more.

This process might be well worth watching.