A major investor in Verso, owner of the paper mill in Jay, sold off more than $18 million worth of shares in the first two weeks of January, just months after expressing frustration with returns on the investment.
On the heels of those transactions, Verso Corp. announced Tuesday, days after the major investor sold off more shares, its Strategic Alternatives Committee may look into selling the entire company outright. This announcement, which came Tuesday in a filing with the U.S. Securities and Exchange Commission, comes months after the company formed the committee to look at what it called transaction alternatives, including potentially selling individual mills.
According to an earlier filing with the U.S. Securities and Exchange Commission, Mudrick Capital Management, L.P., a major shareholder of the Verso mill, made four transactions from Jan. 3 to Jan. 12. At the time of the sales, the price of a share had risen to nearly $17 a share, up from a low of just over $3 a share.
In the most recent sale, Mudrick sold 50,000 shares at an average price of $16.43 for a total value of $821,500. On Jan. 10, Mudrick sold 125,000 shares at an average of $16.91 for a total value of $2,113,750. On Jan. 5, Mudrick sold 798,849 shares at an average of $16.74 for a total value of $13,372,732. On Jan. 3, Mudrick sold 312,746 shares at an average of $16.63 for a total value of $5,200,966.
Mudrick previously had owned 15.3 percent of Verso’s stock, or 5,218,411 shares. Because Verso is a public company and Mudrick owns more than 5 percent of the company’s stock, Mudrick is required to report purchases of additional Verso stock to the SEC.
Several other investors recently have bought and sold shares of the company. Voya Investment Management LLC acquired shares of Verso worth $104,000. Wells Fargo & Company MN acquired shares valued at roughly $130,000. Rhumbline Advisers acquired shares valued at around $166,000. Charles Schwab Investment Management Inc. acquired shares valued at approximately $275,000. California State Teachers Retirement System acquired shares valued at about $280,000. Institutional investors own just over 53 percent of the company’s stock.
A handful of analysts have issued reports on the company recently. ValuEngine upgraded Verso from a “sell” rating to a “hold” rating on Dec. 31 in a research report. B. Riley boosted its target price on Verso from $11.25 to $20 and gave the stock a “buy” rating in a Dec. 20 research report. Zacks Investment Research lowered Verso from a “buy” rating to a “hold” rating in a Nov. 23 research report. And BWS Financial boosted its target price on Verso from $15 to $20 and gave the stock a “strong-buy” rating in a Nov. 17 research report.
Verso did not have a comment on Mudrick’s sale of stock. Mudrick did not respond to a request for a comment.
Lloyd Irland, a consultant and longtime observer of the Maine forest industry, said that without knowing all the details, it was difficult to interpret what, if anything, Mudrick’s sale means. He said it could be a totally neutral move and might not indicate anything about the future of the mill.
Shares of Verso stock closed at $17 Tuesday on the New York Stock Exchange.
The Androscoggin Mill, owned by Verso Corp., has faced difficulty in recent months. Earlier this summer, the mill shut down its No. 3 paper machine permanently, resulting in the layoff of about 120 workers, though many of those workers either had found new employment or had entered into training programs before the machine was switched off.
Mudrick Capital is a New York City-based investment firm managed by Jason Mudrick. According to its website, Mudrick Capital Management, L.P., is an investment firm that specializes in long- and short-term investments in distressed credit. It was founded in 2009 with $5 million under management. As of September, it had grown to manage about $1.6 billion.
According to an SEC filing in 2017 jointly made by eight separate entities managed by Mudrick, they were frustrated with the returns on their investment.
“The Reporting Persons are deeply frustrated with the Board’s inaction to address the Issuer’s rapidly deteriorating financial position,” the filing reads. “The Reporting Persons have expressed these frustrations to the Board and intend to continue its dialogue with the Board to help enact a strategic plan that will return value to stockholders, including a potential sale of the Stevens Point and Androscoggin mills. If the Board does not engage with the Reporting Persons in good faith, the Reporting Persons intend to pursue all other avenues to protect its investment.”
Days after Mudrick’s frustration filing in 2017, Verso announced it was forming a committee to explore what it called transaction alternatives, including the potential sale of some mills. The announcement, which came in an SEC filing, said the company had formed a Strategic Alternatives Committee, which will continue “efforts to identify and evaluate a range of potential strategic transaction alternatives, including the possible sale of some Verso mills, engage in discussions and oversee the due diligence process with parties potentially interested in transactions with the company, and recommend to the board whether any proposed transaction is in the best interests of the company and its stockholders.”
In a conference call this past summer, CEO Chris DiSantis said, “Androscoggin Mill is being evaluated for additional capital investment for expanded product line offerings and to enhance cogeneration capabilities.”
In that call, Verso managers said they hired a consultant to look at each of the company’s seven mills and the company as a whole to determine how to wring the best value out of them for shareholders. That consultant, global investment bank Houlihan Lokey, is the top mergers and acquisitions adviser in the country, according to Thomson Reuters. The Androscoggin Mill was singled out as an example of how converting to a new product line and reducing excess capacity positions the company to increase revenue.
The mill’s No. 5 machine was operating at 78 percent capacity and growing, according to the second-quarter report. Once it achieved full capacity, it was expected it could contribute $10 million in revenue.
In an earlier filing with the SEC, the company said severance and benefits payouts related to the shutdown of the No. 3 machine would amount to about $4 million, plus another $1 million in writing off spare parts and inventory produced from the No. 3 paper machine in 2016.
The mill is one of many across the state that were falling onto hard times. Closures and layoffs have plagued the state’s paper industry in recent years. Five mills have closed in the last few years, including Verso’s Bucksport mill in 2014, with more than 500 jobs lost. The Madison Paper mill closed in May 2016, which put more than 200 people out of work. More than 2,300 mill workers in Maine have lost their jobs since 2011.
The Androscoggin Mill laid off 300 employees in 2015 as part of a plan to reduce production capacity. Verso then emerged from bankruptcy in the summer of 2016 with about 560 employees. In November 2016, the company said it expected to lay off around 190 workers.
The most recent layoffs left the Androscoggin Mill with about 400 employees. Of the 120 employees who were laid off, about 20 were rehired for new positions at the mill. The mill’s employees are not unionized.
Colin Ellis — 861-9253
cellis@centralmaine.com
Twitter: @colinoellis
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