Price crash looms for LWP shares

Shareholders of LWP Capital Inc. could be taking yet another financial hit.

KSV Advisory Inc., the court-appointed liquidator of the company formerly known as Legumex Walker Inc., has issued a news release saying LWP shareholders could be getting less than anticipated for their stock.

LWP entered into an agreement last September to sell its special crops division to the Scoular Co. for $94 million plus an amount to be paid for LWP’s working capital.

In November, Scoular agreed on a preliminary working capital value of $71.5 million.

However, Scoular filed a notice of objection in February, saying the final closing working capital amount should be reduced by $25 million because the net realizable value of the inventory wasn’t worth as much as it originally thought.

LWP shares experienced a precipitous decline since the company was first listed on the Toronto Stock Exchange in July, 2011 at $8.85 a share.

LWP executives initially told shareholders the sale to Scoular would net them $2.50 to $2.75 a share, but that had dropped to $1.69 to $1.98 per share by the time shareholders voted on the deal in November because of the smaller than expected working capital. Shareholders still approved the sale to Scoular.

Now comes the news that the value could be further eroded.

“If the purchaser’s claims are not definitively determined in a manner that is favourable to the company, the funds available for distribution to shareholders may be materially less than the range of $1.69 to $1.98 per share,” KSV said in a May 20 news release.

The company had 16,294,635 outstanding common shares when the stock was delisted Dec. 31, 2015. If Scoular receives the $25 million reduction in working capital that it is looking for, it would amount to a further hit of $1.53 per share.

An Ontario Superior Court of Justice judge has ruled that Stat Publishing editor Brian Clancey should be hired to determine the net realizable value of the closing inventory. KSV said it would provide an update for shareholders once that evaluation is complete.

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