According to sources in contact with The Wall Street Journal, Best Ideas Newsletter portfolio holding Ancestry.com (click ticker for report: ) will go private at $32 per share. European private equity group Permia, large shareholder Spectrum Equity, and management will participate in the deal.
We think the consortium is getting quite a deal, since $32 is below the low-end of our fair value range and well below our point-estimate fair value of $45 per share. We’re shocked to see little interest from private equity firms looking to take the firm private, especially when considering the firm’s cash-rich business model and growth prospects.
In retrospect, we could have pointed to acquisitions of Archives.com and 1000memories as evidence that management would be involved in the transaction, since large corporate capital allocation decisions are usually postponed in anticipation of a change in ownership. Though the deal is still a 40% premium to the market price when management acknowledged exploration, we still believe shareholders deserved a higher price. We expect to see some shareholder lawsuits in the next several days.
Ultimately, while the deal was disappointing, in our view, we will look to divest the position and put some cash to work in a new idea. Subscribers to our Best Ideas Newsletter should expect a transaction alert via email tomorrow.
Disclosures: Brian Nelson has long exposure to ACOM at the time of this writing.
Disclosures regarding 16-page report (January 2012): https://seekingalpha.com/article/317432-why-ancestry-com-is-undervalued