Monday, 1 June 2009

Brainhunter Must Move Fast To Close a “Deal”

Brainhunter (TSX: BH)
Basic Shares Issued: 43.958 million


An interesting news release hit the wires today as very specific timelines have been disclosed for Brainhunter to close a “transaction” under the agreement the company has with its senior lenders.

BH has signed extension letters on $31 million owed to senior lenders but that agreement is only good to September 30th of this year.

The company must deliver to the lenders by July 31st a finalized agreement for a “proposed transaction”.

The question becomes, does transaction mean 1) private equity capital injection 2) private equity buy-out 3) private equity strategic partnership or perhaps 4) a merger? Since this past February, Ernst & Young Orenda Corporate Finance has been beating the private equity bushes in an attempt to find a partner or buyer for BH.

With the first and critical deadline a little under sixty days away, the fuse is short for Brainhunter and its advisors to pull a rabbit out of the hat. While we don’t know how far down the road the company is with any party or parties, it stands to reason that they haven’t been sitting around with deadlines fast approaching.

It’s no surprise that the stock has been in a coma for many months. The market has no clue how BH will look in the future and we all know that uncertainty is a four letter word. In short, the market has no idea what sort of value could be on the table if the company is forced to sell under current conditions.

To read the news release click here.

What’s been interesting in recent weeks is the amount of news that’s been coming out of BH regarding new business wins. The company has never been accused of raining news releases on the market.

In its Q2/F09 (March 31) release, management stated that BH has $327 million in backlog business booked to the end of F09 (September 30) and $100 million to the end of the current fiscal year. In addition, it talks about cost reductions to the tune of $4 million in F09, which will be evident in the fourth quarter.

These moves along with a host of others point to a company that’s been grooming itself for a “transaction” and is going to put its best dress and lipstick on before suitors come calling. We hope they show up at the door with roses and not the thorns.

Revenues for Q2/F09 were $52.7 million with a $2.8 million loss compared to a loss of $2.5 million on just over $60 million in sales for the same period last year.

To read the news release click here.