A series of unsolicited takeover proposals from Firm Capital Asset Management Corp. have prompted The Becker Milk Company Ltd. to explore the possibility of a sale.
Toronto-based Becker (TSX: BEK.B), one of Canada’s quietest and non-public, public companies, announced last week in a three-sentence press release that it has retained PriceWaterhouseCoopers Real Estate Inc. to help it explore the possible sale of the company.
Becker Milk Co. Ltd. was once a major convenience store chain, but has been whittled down to its current status as a real estate company after it sold its store operations to Silcorp Ltd., parent company of rival Mac’s Convenience Stores, in November 1996. (Silcorp was subsequently acquired by Alimentation Couche-Tard in April 1999).
Firm Capital, a real estate private equity investment firm and alternative investment manager, is not speaking publicly about its attempts to buy the Becker real estate assets. In a statement, the Toronto-based company said it was “pleased” Becker was moving forward on a possible sale and expressed its frustration with the family-owned company.
“For the past several months, Firm Capital has made several proposals to acquire the Company or its assets and has encouraged the board of directors of Becker’s to pursue a value maximization process; however the Becker’s board of directors was not willing to engage in any meaningful discussions,” Firm Capital stated.
“These proposals represented full and fair value for Becker’s assets and a significant premium to Becker’s recent share price trading levels,” it added.
It does not appear Becker management can be forced into selling the company as the family of founder Dr. Geoffrey Pottow controls Becker’s fate through their holdings of the majority of its voting shares.
Firm Capital is a holder of Becker’s Class B, non-voting shares, and has not disclosed how many it owns.
Strategic dead end
Firm Capital insists it is the end of the line for Becker Milk after more than 50 years of operations and that the shell of the company should be sold off.
“Becker’s has no growth prospects and has not grown beyond its existing portfolio of assets for many years and the sale of Becker’s is a logical outcome that will result in value being maximized for all of Becker’s shareholders,” Firm Capital insisted.
What’s it own?
While Becker Milk is a public company, its financial reporting over the years to shareholders has been less than fulsome.
According to its most recent MD&A from June 2013, Becker’s property holdings consist of 67 retail commercial properties. One property is in Metro Toronto and the balance is in other areas of Southern Ontario. The majority of the properties are single-store sites with a few multi-store plazas. As of April 30, 2013, the company had leased to third parties 83 retail stores and four residential sites. As well, the company owns four parcels of unoccupied land, one of which is listed for sale.
Becker sets the total fair value of investment properties at $32.8 million “based on a mix of internally prepared cash flow appraisals and independent appraisals conducted by a nationally recognized real estate appraisal firm.”
Becker stated that fair value was based upon independent appraisals for a selection of 14 of its 67 properties at the end of its most recent fiscal year.
This marks the second time in a decade Becker Milk has explored a sale of the company.
In 2007, the company hired on TD Securities Inc. as its financial adviser to conduct a review of strategies “to enhance shareholder value,” it said at the time. That process went nowhere and Becker quietly returned to managing its real estate operation.
While Becker Milk is far from the most active company traded on the Toronto Stock Exchange, management is not getting rich running it. Becker’s MD&A shows that key management of the company, defined as the chairman and chief executive officer, the vice-chairman and the chief financial officer, were paid salaries and other compensation totalling $388,810 for the year ended April 30, down from $409,595 the previous year. Becker does not identify its top management in its report.
Firm Capital Asset Management Corp’s entities include Firm Capital Mortgage Investment Corporation, a TSX-listed leading non-bank lender providing Construction, Bridge, Equity, and Conventional Real Estate Financing to builders, developers, and real estate investors and Firm Capital Property Trust (TSXV : FCD.UN), a TSXV-listed real estate investment trust focused on co-owning a diversified property portfolio of multi-residential, flex industrial, net lease convenience retail, and core service provider professional real estate in partnership with management and industry leaders.