| The Dirt-Cheap Stock Detective® |
March Networks Corporation (TSX:MN)
December 9, 2011 |
On December 9th, March Networks announced that it had agreed to be acquired by Shenzhen Infinova Ltd. for $5.00 per share in cash. The take-over values March Networks at $90 million and is expected to be completed by April 2012 subject to closing conditions. The sale completes a six-month strategic review of the company, and represents a 24% premium to the June 8th 2011 closing price of MN, which is the last price before the company announced that it had effectively put itself up for sale.
Consistent with the ABC Funds style, we are reminded yet again the importance of discipline, patience, and company fundamentals. As we have repeatedly stated, it is our belief that prevailing common stock prices reflect a lack of investor confidence primarily caused by the European debt crisis and not the relatively strong fundamentals of North American corporations. With this in mind, although 2011 has been a challenging year for March Networks, we believed the company’s share price was trading at a discount to its intrinsic value under more normal market conditions.
Prior to this morning’s announcement, our ABC Funds held 1.7 million shares of March Networks in three of our funds. While we are pleased with the outcome of our investment, we believe it gives further credence to our broader view that common stock prices are trading at discounted valuations. It is important to note that the March Networks acquisition represents the second take-over of an ABC Funds’ holding in the past two months, with Daylight Energy having been recently acquired at a 120% premium to its previous closing price. We expect to dispose of our MN shares in the coming days and use proceeds to acquire other undervalued common stocks consistent with the ABC Funds style.
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