Albright Capital Management Will Vote No On $14.45/Share Unsolicited Take Private Offer for Atlas Corporation
09/06/2022 - 09:00 AM
Encourages Other Public Shareholders to Vote Against Consortium’s Proposed Transaction at Price Offered
Believes Atlas Corporation Shares Remain Significantly Undervalued
WASHINGTON --(BUSINESS WIRE)--
Private investment firm Albright Capital Management , a large minority shareholder in Atlas Corporation (NYSE: ATCO) (“the Company”), today announced in an open letter to the Special Committee of the ATCO Board that it will vote no on the $14.45 Consortium of ATCO insiders and ONE, the Company’s largest shipping counterparty (“the Consortium”).
Open Letter to ATCO Special Committee:
We advise you that Albright Capital Management will vote no on the $14.45 Atlas Corporation (“ATCO”) insiders and ONE, the company’s largest shipping counterparty (“the Consortium”).
We believe Albright Capital is the second largest minority public shareholder in ATCO eligible to vote on the offer and we intend to encourage other public shareholders to join us in voting against the proposed transaction at this price .
BACKGROUND
Let us provide some context on Albright Capital and our history with the Company so that our perspective on this transaction is clear. Co-founded by former U.S. Secretary of State Madeleine Albright in 2005, our firm is an SEC registered investment advisor with deep experience successfully navigating global markets, and an historical emphasis on global infrastructure, real assets, and financial services.
Albright Capital acquired shares in ATCO when APR Energy was merged with Seaspan to form Atlas Corporation in 2020. As a founding institutional private equity investor in APR Energy in 2009, we have deep insight into its strong capabilities and significant future growth opportunities. We played an active role in helping APR build its business and emerge as a market leader in large scale specialized power solutions. From a small base in Latin America when we first invested, APR has now delivered ~5GW of power to communities in over 35 countries.
At the time of the merger, we believed Seaspan would be a good sponsor to support APR’s future growth. We also believed Seaspan shares were significantly undervalued by the market.
We continue to believe ATCO shares, representing the combination of Seaspan and APR, remain significantly undervalued.
UNDERVALUATION
Before providing our rationale for why ATCO is fundamentally undervalued (below), it is important to understand that the $14.45
This purchase multiple is a 6.25% discount to the company’s last ten years’ average multiple of EBITDA ( ~9.6x) and does not reflect the ~43% EBITDA growth management has laid out in its own 2022-2024 forecast.
One important reason for ATCO’s undervaluation is that it is covered by “shipping” rather than “general infrastructure” analysts. Shipping analysts are not generally accustomed to assessing and assigning appropriate value to ATCO’s ~$18.9 billion in future revenues from long-term contracts. ATCO’s ship leases are 7-8 years in duration on average with a diversified group of high-quality counterparties such as MSC Mediterranean Shipping Co. , ZIM, and COSCO. Shipping analysts are more accustomed to evaluating companies, unlike ATCO, with exposure to notoriously volatile “spot” market shipping prices, so their financial models tend to be relatively short-term in nature.
ATCO is at an important and very positive inflection point – a crossroads that the analysts seem to ignore, but which we believe the Consortium fully understands and wishes to capitalize upon with their unsolicited offer. 68 fully financed and fully contracted new ships will come on line in 2024, just beyond the forecasting horizon of most ATCO analysts . Albright Capital believes that revenues will increase to ~$2.4 billion in 2024 from ~$1.7 billion in 2022, and that income from operations will increase to ~$1.2 billion from ~$750 million .
We also believe that this forecast makes it likely that ATCO will succeed in achieving an investment grade credit rating in the medium term , which should reduce its cost of capital and increase its equity value.
With the company at this inflection point, Albright Capital believes ATCO shares will likely trade between $23 $29
If ATCO were given appropriate credit by the market for being an infrastructure company with long term contracts, it would be realistic for the company to achieve significant multiple expansion and trade in a range of $30 $40 . One reasonably good proxy supporting this valuation would be Brookfield Infrastructure Partners (NYSE: BIP), which operates in four segments: utilities, transport, midstream and data. BIP currently trades at ~14X EV/EBITDA and over the last ten years has traded at ~19X EV/EBITDA (using Refinitiv date as-of August 23, 2022 ).
The foregoing highlights the economic penalty ATCO shareholders will experience if compelled to sell at the $14.45
CONCLUSION
The consortium’s current take-private proposal does not fully and fairly reflect ATCO’s current business and prospects. Moreover, it does not appear to be the result of arm’s length negotiations. Neither the Special Committee, nor the independent shareholders, should approve it.
We welcome engagement with the Special Committee and other genuinely interested parties, who can reach us by email at ATCOProcess@albrightcapital.com .
Sincerely,
Gregory Bowes
Managing Principal
Albright Capital Management
ABOUT ALBRIGHT CAPITAL MANAGEMENT
Albright Capital Management is a private investment firm focusing on the global emerging markets. We are sector-agnostic, but have significant expertise in infrastructure, infrastructure services, and real assets. We are committed to delivering positive impact while seeking attractive commercial returns. We were co-founded by former U.S. Secretary of State Madeleine Albright in 2005.
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ATCOProcess@albrightcapital.com
Source: Albright Capital Management
