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MONTREAL - The co-founders of Cossette haven’t given up trying to regain control of the Quebec-based advertising agency, holding out the possibility Wednesday of raising the stakes in their bidding war with a U.S. rival.
Cosmos Capital Inc., headed by former Cossette president and co-founder Francois Duffar, has already matched a share offer proposed by Mill Road Capital LP, a U.S.-based private equity firm.
Cosmos said it is now willing to pay $7.87 per share for the shares of Cossette that it already doesn’t own.
The Mill Road bid values Cossette at $131.5 million.
Cosmos said Wednesday it could raise the offer if it’s granted full access to non-public documents that other bidders have seen, such as business plans, client contract agreements and other financial information, said spokeswoman Sylvia Morin.
"Once we’ve viewed that, we might even consider increasing or putting in a superior offer," she said of the information Cosmos is seeking.
"Shareholders might win in all of this because it might result in a higher bid."
The current offer by Cosmos expires Dec. 7.
Cossette said Wednesday that its board will review the amended offer announced by Cosmos before it determines if it will do anything.
The company recommended shareholders defer making any decision until the board has had an opportunity to fully review Cosmos’ amended offer.
Shareholders reacted positively to the bidding war, sending Cossette shares up 20 cents to $8 on the Toronto Stock Exchange.
National Bank financial analyst Adam Shine said the sale now appears destined to occur with a share price above $7.87.
"It’s in shareholders’ best interests now to have Cossette allow Cosmos into the data room to help it formulate a higher bid," he wrote in a research note released Wednesday.
Shine also wrote that Cosmos’ move to match Mill Road’s offer speaks to the "intensity of its desire" to acquire Cossette.
"In short, Cosmos isn’t going away."
Cosmos had earlier offered $5.25 per share for Cossette in a deal that valued Cossette at about $87.7 million, but would have cost Cosmos less since it already owns nearly one-fifth of Cossette’s stock.
Connecticut-based Mill Road is focused on investments in publicly traded companies under $250 million in size. Its current portfolio includes companies in retail, manufacturing, business services and consumer products industries.
Frank Palmer, CEO and president of advertising and communications agency DDB Canada, said Cosmos would bring its expertise and understanding of the advertising business as the owner.
"If Cosmos was to buy it, I think it would be much better for the company and their clients," Palmer said from Vancouver. "It’s better for everybody if a company buys it that understands the business in general."
Palmer said Cossette stock isn’t widely traded and shareholders who are no longer with the company want to see the price increase. The stock has seen a 52-week low of $2.78.
Morin said Duffar, who is a significant shareholder in Cossette, believes the Cossette has underperformed. He stepped down in 2007 as head of Cossette.
Cossette has been publicly traded for a decade and Morin said Duffar would likely take it private as well.
Cosmos also includes former Cossette vice-president Georges Morin.
It has more than 1,400 employees with offices across Canada and in California, the United Kingdom and China. Customers include General Mills of Canada, Bell, Coca-Cola Ltd., Hydro-Quebec and Sony Ericsson and Virgin Travel and Virgin Trains in the United Kingdom.
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