Ever since Monster Worldwide Inc. announced its takeover by Dutch firm, Randstad, it has been facing opposition from its biggest shareholder, MediaNews.
The battle has intensified with MediaNews, which holds 11.6% stake in Monster, planning to replace the board by electing seven new members in a bid to thwart the deal. MediaNews plans to file a preliminary consent solicitation statement with the SEC to execute a board reshuffle. If it succeeds in ousting the present board, MediaNews wants Daniel W. Dienst, a former executive of Martha Stewart Living Omnimedia Inc, a unit of Sequential Brands Group, Inc. (SQBG - Snapshot Report) , to serve as the interim CEO till a new CEO is selected.
In a letter dated Sep 30, MediaNews said that it has “no confidence” in the existing board and CEO owing to their repeated failures to take correct “strategic and operational decisions to maximize value for shareholders”. However, Monster, in response, has maintained that MediaNews’ claims are “flawed”. Further, it states that MediaNews is asking shareholders to reject the proposal without any solid alternative. Per the deal with Randstad, Monster’s shareholders will get $3.40 per share, representing a 22.7% premium to Monster's closing stock price on Aug 8, 2016. Monster continues to endorse the deal to shareholders.
On Aug 9, 2016, Monster Worldwide announced that Amsterdam-based, Randstad will acquire its assets for about $429 million or $3.40 per share in cash. At that time, MediaNews, while disclosing an 11.6% stake in Monster, urged the other shareholders not to approve the merger as the deal represented “the textbook definition of selling at the bottom." It suggested that Monster should “explore all strategic options, including an auction, a review of business operations and/or a restructuring.”
Monster has already stated that the possibility of a further cut in operating expenses is limited given the already $100 million cost cuts achieved over the last few years. Plus, capex has almost been slashed by half over the last few years and further reduction will affect its ability to aggressively compete for market share. Also, there are no non-core/underperforming assets left to divest.
Monster had asked shareholders to consider the fact that the landscape is now dominated by bigger companies with better capital resources and that its competitive position can only be improved through continued investment. But since it operates in a “low growth environment”, margin will be under pressure for a long time. Randstad, which is one of the world’s largest staffing firm, should provide it with ample capital to grab a bigger share of the market.
We believe the deal with Randstad should be in Monster’s favor. Monster has been struggling to revive its business for a long time now. The company has been seeing persistent weakness in its transactions business in key regions like North America and Canada. Even its re-branding and cost-cutting initiatives yielded little results as evident from the last reported quarter’s results.
At present, Monster carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the same space include Asure Software, Inc. (ASUR - Snapshot Report) and LightInTheBox Holding Co., Ltd. (LITB - Snapshot Report) . Both sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Estimates for both Asure Software and LightInTheBox have improved over the last 30 days. For the current year, estimates for Asure Software have gone up from 15 cents to 19 cents while for LightInTheBox, the loss estimate has narrowed from 18 cents to a loss of 7 cents.
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