Indigo Books & Music has received a proposal to take the retailer private from a pair of companies owned by controlling shareholder Gerald Schwartz, who sits on Indigo's board of directors and is the spouse of Indigo founder and CEO Heather Reisman, the Financial Post reported. Reisman was replaced as CEO in the fall of 2022, only to return to the position last September following the sudden resignation of Peter Ruis.
The non-binding proposal from Trilogy Retail Holdings and Trilogy Investments would involve the purchase of all issued and outstanding shares of Indigo it does not already own for C$2.25 (about US$1.67) in cash per common share. The two companies already own 56% of the company, and another 4.6% belongs to Reisman through a different holding company. Trilogy said the offer represents a 50% premium over Indigo's closing price on the last day of January, and the company is not interested in selling any of its shares.
Indigo spokesperson Madison Downey told the Canadian Press (via Rocky Mountain Outlook) that the Indigo board has established a special committee of independent directors to evaluate the proposal and "any viable alternatives that may be available to the company."
A financial analyst who still covers Indigo called Schwartz's offer "wholly inadequate" in a note quoted by the Financial Post. "We remind investors that Mr. Schwartz was buying stock previously from November 2017 to March 2018 at prices ranging from $18-$20," David McFadgen of Cormark Securities wrote. "Has the business deteriorated so much that it can never be turned around to warrant an offer of only $2.25 a share?"
McFadgen added that Schwartz's offer attributes "little or no value to the brand" or to the company's lease portfolio and that Indigo could improve margins and may be improving its "cost structure."
On the other hand, Richard Leblanc, a professor of governance, law and ethics at York University in Toronto, said that going private would allow Indigo to work without "onerous" auditing, compliance and disclosure and committee and board structure requirements of the Toronto Stock Exchange. He told the Canadian Press that "the rationale [for the privatization offer] is not to be saddled with public reporting responsibilities because Indigo has been through a lot."
Earlier this year, Indigo announced layoffs as part of its ongoing efforts to improve operations, the Financial Post wrote, noting that Indigo "has seen several quarters of financial losses as well as a number of changes to its executive and board of directors over the last year." It also suffered a severe cyberattack last year.
Most recently, the company reported a net loss of C$22.4 million (about US$16.6 million) in its second quarter. Shares in Indigo closed last Thursday down 1.33% at C$1.48 (about US$1.10). The stock price's 52-week high was C$2.60 (about US$1.93) on October 4.