Going private is a very public affair for Coast Dental
© St. Petersburg Times
Does going to the dentist make your knees weak? Imagine what the long-suffering investors in Tampa's Coast Dental Services Inc. must feel.
The once promising chain of speedy and low-priced dentist centers went public in 1997 with big expansion plans and enjoyed a spike in its stock price topping $90 a share.
Alas, it was a brief stop atop the stock market heights. Since early 1998, the stock of Coast Dental has done just that: Coast. Downhill.
On April 3, 2001, the stock hit an all-time low of 62 cents. With an engineered boost from a reverse stock split (three shares became one, boosting the price), shares since then have bounced between $2 and $6.
Now Coast Dental figures it has a cure for its stock ache. Yank it, like a bad tooth.
In a move we will see by more companies in this wobbling stock market, Coast Dental is bagging its status as a publicly traded company after six years. It's going private. Back to where it started, when it was founded in 1992 by three brothers, Terek, Adam and Tim Diasti.
This week, Coast Dental began the tricky job of offering to buy each of its outstanding shares for $4.50 in cash. That's about the price at which the stock currently trades, which won't thrill company investors hoping for some premium in the buyout.
Why forsake a public corporation (and all the work and expense it took to become public) for the anonymity of a private business? Coast Dental offers these reasons:
You won't play? We'll go away. As if hit by novocaine, investors grew numb to Coast Dental's prospects in 2001. That left the company questioning the benefit of being public when its shares were weak and trading volume thin, leaving larger shareholders with little liquidity to cash out. How thin was Coast Dental's trading? On 27 percent of the trading days in the year ending on Feb. 1 no company shares were traded at all.
Who needs the extra hassle? Where is Enron when you feel like kicking something? Thanks to the Enron-inspired Sarbanes-Oxley Act of 2002, a public company faces more and more costs in complying with legal, auditing, accounting and other disclosure requirements. Coast Dental also says it's at a disadvantage with competing private companies that do not have to share as much information about their business practices.
In October, Coast Dental's board of directors debated the company's fate. By December, the board was told a $2-million loan was available to repurchase company shares, with additional backing from Coast Dental's majority shareholder, the Diasti Family Limited Partnership.
Here's where things get tricky in these public-private deals.
To protect the interests of public shareholders in the company, the board named two independent and apparently new directors, Richard Welch and Peter Sontag, to a special committee. Welch is the former chief financial officer of a former Largo eye practice management company called Vision Twenty One.
Austrian-born Sontag is the former chief executive of Tampa's 800 Travel Systems, a telephone and Internet travel agency.
The two directors are no strangers to troubled companies. Vision Twenty-One's business dwindled in the 1990s when the public company was delisted. It relocated to Baltimore in 2000. 800 Travel declared bankruptcy last year.
In December, Coast Dental wanted to pay its public shareholders $3.25 a share, almost a 20 percent premium above the $2.75 that shares traded for at the time. By early February, that offer was deemed inadequate by Welch and Sontag, backed by outside advisers.
On Feb. 7, Coast Dental agreed to bump its offer by 50 cents to $3.75 a share. Again, that offer was rejected as too cheap. When Coast later boosted its offer to $4.25 a share, Welch and Sontag countered. How about 50 cents more, or $4.75 a share?
On Valentine's Day, fittingly enough, Coast Dental proposed an offer of $4.50 a share -- take it or leave it. We'll take it, Welch and Sontag agreed.
A week later, Coast Dental publicly announced its $4.50 offer. That offer began this week. Coincidentally, $4.50 was the stock's closing price on Thursday.
Shareholder reaction so far seems less than ecstatic. "Dontcha love what they are saying? "Take $4.50 or you may never get liquidity'," growled one complaint appearing on the Yahoo message board dedicated to Coast Dental. A big gripe? Why offer only $4.50 when the company's "book value" -- its assets minus its liabilities -- are worth more than $22 a share?
Will Coast Dental successfully go from public to private? Hurdles remain. And what happens if Coast Dental happens to regain its success as a private company?
Maybe it will go public. Again.
-- Robert Trigaux can be reached at email@example.com
or (727) 893-8405.
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