FrontFour Capital Group Urges Innophos To Explore A Sale - Quick Facts

(RTTNews) - FrontFour Capital Group LLC said that it strongly believed Innophos Holdings Inc. (IPHS) should consider hiring an investment bank to explore the sale of the Company at a meaningful premium to current share prices.

In a letter to the company, FrontFour Capital Group noted that it believes there would be several interested strategic parties as Innophos' end market exposure remains of high interest to potential acquirers due to stricter food regulations, the rising, global middle-class and strong financing markets. A sale of Innophos at an 11x multiple, which is on par with what Balchem Corporation paid for Sensory Effects earlier this year, would result in a realization of approximately $80 per share, or 45% upside from current trading levels without assuming any stock buybacks.

FrontFour Capital Group LLC, which is a significant Innophos shareholder with a current stake of approximately 3.3% of the outstanding shares, stated that it continues to believe that there is a significant opportunity to improve operations, optimize the current capital structure and pursue strategic alternatives for the separation of the financial exposure within the Granular Triple Super Phosphate or "GTSP" segment and/or the Company in its entirety, given today's robust M&A activity and attractive multiples paid in the food ingredients space over the last 12 months.

FrontFour Capital also stated that the Company has repurchased stock over the past several years only to offset dilution from long-term incentive stock grants. It believes an acceleration of stock repurchases is warranted and would be highly accretive to shareholder value.

"At current trading multiples, we view immediate and substantial share buybacks and the resulting share shrink as the preferred path to value creation, especially as compared to the pursuit of acquisition opportunities that carry execution risk, and as you stated, would likely be expensive versus your current valuation and not accretive to earnings," FrontFour Capital said.