Concerns on Priority Technology Holdings' Proposal
Buckley Capital Advisors, holding about 2.2% of Priority Technology Holdings, Inc. (NASDAQ: PRTH), is voicing strong concerns regarding a recent take-private proposal initiated by the company’s Chairman and CEO, Thomas C. Priore. According to Buckley, the proposal significantly undervalues the company and represents an opportunistic acquisition attempt that lacks consideration for individual shareholder interests.
Opposition to the Proposal
Buckley Capital Advisors submitted a letter to Priority’s Board of Directors opposing the preliminary, non-binding proposal made by Priore on November 9. The proposal aims to acquire all outstanding shares that Priore and his affiliates do not already own, offering a cash range of $6.00 to $6.15 per share. Buckley believes this range drastically undervalues the company's assets, citing that it fails to reflect the intrinsic value of PRTH, which is supported by a robust business model and promising growth prospects.
Call for Independent Review
In the letter, Buckley Capital Advisors urged the Board's Special Committee to reject the proposal outright, calling for a rigorous and transparent review of all strategic alternatives available to the company. This includes potentially selling the entire business or continuing operations as a public entity with a clear growth strategy aimed at maximizing shareholder value.
Market Conditions and Temporary Price Decline
Furthermore, Buckley argues that the current decline in PRTH’s share price is a temporary phenomenon, driven by broader macroeconomic factors affecting the financial services sector. They assert that the proposed purchase price stands at less than half of PRTH’s intrinsic value, emphasizing that it should not serve as a basis for acquisition pricing.
Strong Financial Position
Priority Technology Holdings has established itself within the industry with a predictable revenue model that boasts over 90% recurrent or repeat business. The company is projected to achieve earnings per share of approximately $1.30 in the upcoming fiscal year, presenting an attractive investment opportunity if valued properly against its earnings potential.
Valuation Analyses
Multiple valuation analyses indicate that the true worth of PRTH shares is significantly above the offer presented. Buckley notes that around 60% of the company's earnings before interest, taxes, depreciation, and amortization (EBITDA) is generated from a high-margin, recurring revenue segment—suggesting that the intrinsic value should exceed the current proposal.
Sum-of-the-Parts Valuation
A detailed sum-of-the-parts valuation indicates a significant disconnect between PRTH's estimated valuation and its peers. Buckley estimates that the company is fairly valued between $15 to $20 per share based on its several divisions' performances. With projected EBITDA for key segments, including SMB and Enterprise, it is clear that the proposal is inadequate.
Sell-Side Analyst Support
Brokerage analysts who focus on PRTH echo Buckley’s sentiments, with targeted price estimations well above the current offer. Estimates from analysts at major financial institutions include price targets of $11 and $13 per share, reinforcing the belief that the proposal does not reflect the company's potential.
Critiques of the Proposal
The financial community is largely in agreement; the acquisition proposal of $6.00 to $6.15 per share doesn't capture the company's strengths, especially given recent transactions in the financial services arena that indicate much higher valuations for similar companies. Comparisons illustrate how PRTH remains undervalued relative to industry benchmarks, creating a call for better negotiation efforts from the Board.
Recommendation for the Board
Buckley Capital Advisors strongly advises the Board of Directors to act in the best interests of all shareholders by rejecting the current proposal. They also recommend establishing an independent review committee to ensure that shareholder value is maximally preserved. This includes evaluating other strategic alternatives for the company, promoting transparency throughout the process.
Conclusion
In conclusion, Buckley Capital Advisors remains steadfast in its stance against the undervaluation of Priority Technology Holdings. They are committed to seeking a fair and just resolution that favors all shareholders, reinforcing the importance of corporate governance in safeguarding collective interests.
Frequently Asked Questions
What is the main concern regarding the proposal made by Thomas C. Priore?
The main concern is that the proposal significantly undervalues Priority Technology Holdings, with Buckley Capital Advisors arguing it is an opportunistic attempt to acquire the company without fair compensation for shareholders.
Why does Buckley Capital Advisors believe the current share price is inadequate?
They believe that the decline in share price is temporary and not indicative of the company's intrinsic value, which is much higher than what the proposal suggests.
What recommendations did Buckley Capital Advisors make to the Board?
They urged the Board to reject the proposal and initiate an independent review of all strategic alternatives to maximize shareholder value.
What are sell-side analysts saying about Priority Technology Holdings?
Sell-side analysts have provided price targets significantly above the acquisition proposal, suggesting the stock is undervalued based on its future growth potential.
What is the expected earnings per share for PRTH in 2026?
Priority Technology Holdings is projected to have earnings per share of approximately $1.30 in 2026, which further supports the claim that the company's stock is undervalued in the proposal.
