This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Comverge Avoids Crisis at a Big Price

NEW YORK ( TheStreet) -- Comverge's (COMV) sale to a private equity firm may save the energy metering company, but it comes at a big discount that will hurt existing shareholders.

On Monday, Comverge said it would sell itself for $49 million -- or $1.75 a share in cash -- to the private equity firm H.I.G. Capital. That takeover price falls well below analyst estimates of the company's worth and its 1-year highs even after a 2012 stock rally.

"The transaction addresses the risks associated with the company's liquidity position, provides for our financial viability going forward and allows Comverge to continue to execute on its business plan with the financial backing of H.I.G. Capital," said Comverge Chairman Alec Dreyer.

Prior to Monday's private equity buyout, the company released an auditor opinion in a March 15 regulatory filing that showed its finances would break debt covenants, raising "substantial doubt about Comverge's ability to continue as a going concern." In addition, Comverge said it had received default notices from its lenders, precipitating the need for an immediate capital raise or sale.

"Absent the H.I.G. Capital transaction, Comverge believes it would be unable to raise the necessary capital to fund continuing operations, which would place existing stockholder investment in the Company at significant risk," said Comverge in a press release.

Still, analysts gave the Norcross, Ga- based company a value far higher than the $1.75 takeout price, even after accounting for Comverge's liquidity strains. The takeover price falls well below the $2.35 share value for Comverge that analyst polled by Bloomberg give the company. Meanwhile, in early Monday trading, Comverge's shares were trading in line with offer price after a halt related to the deal news.

Content on this page requires a newer version of Adobe Flash Player.

Get Adobe Flash player

Comverge shares have rallied over 40% year to date after falling 80% in 2011 and to all-time lows on continued losses at the company and dwindling liquidity as debts came due.

Overall, Comverge lost $13 million in 2011, adding to a string of lossmaking years as rising expenses cut into the company's fast-growing energy efficiency solution sales.

Comverge's private equity investors may be targeting a continued focus by federal regulators on promoting energy efficient "smart" power grids. Last March, Comverge shares surged after the Federal Energy Regulatory Commission smart grid rules that could eventually aid sellers of energy efficient metering and data like Comverge and EnerNoc (ENOC - Get Report)

As part of Monday's buyout, Comverge will also enter a forbearance agreement on $12 million in debt from lenders like Silicon Valley Bank and Grace Bay Holdings. The company has also agreed to a 30-day "Go Shop" period, where it can seek a higher bid.

Since the fall of 2010, Comverge has used investment banker JPMorgan Chase (JPM - Get Report) to look at a sale of the firm, debt or equity to help raise capital and maintain its covenants. JPMorgan advised Comverge on Monday's sale and will help the company seek alternative bids in its "go shop."

For more on JPMorgan, see why JPMorgan is ready to take Wall Street's top spot.

--Written by Antoine Gara in New York

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
ENOC $6.82 0.00%
JPM $63.20 0.00%
AAPL $93.74 0.00%
FB $117.58 0.00%
GOOG $693.01 0.00%


Chart of I:DJI
DOW 17,773.64 -57.12 -0.32%
S&P 500 2,065.30 -10.51 -0.51%
NASDAQ 4,775.3580 -29.9330 -0.62%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs