Monitor creditor objections delay ruling on bid procedures by one day

By Jim Witters

Wilmington, Del., Nov. 20 - Monitor Co. Group LP's proposed bid procedures drew objections from the official committee of unsecured creditors, who believe the timetable outlined in the $116 million stalking-horse bid negates the opportunity for other bidders to emerge.

Judge Christopher S. Sontchi heard evidence and arguments from the debtors, the committee and stalking-horse bidder Deloitte Consulting LLP during a Nov. 20 hearing on the proposed procedures in the U.S. Bankruptcy Court for the District of Delaware.

He said he would issue a ruling at 9:30 a.m. ET on Nov. 21.

The dispute

The creditors committee is seeking an extension of about 30 days to the timetable agreed upon by Deloitte and Monitor.

But Deloitte and Monitor argued that any delay in closing the deal could result in an exodus of creative talent that could cripple the firm.

Monitor proposed an amended timetable that includes:

• A Dec. 7 bid deadline;

• A Dec. 10 auction, if necessary; and

• A Dec. 12 sale hearing.

Deloitte said the sale hearing could occur any time between Dec. 12 and Dec. 16, but the potential buyer wants to close the deal before Christmas.

The creditors committee said the compressed timeframe precludes other bidders, who would have about two weeks to complete a due diligence process that took Deloitte 90 days.

The committee's financial adviser testified that Deloitte's offer also appeared to be low in comparison to other transactions involving similar professional firms.

Financial adviser Stephen Darr said he examined 15 to 18 publicly traded firms and 18 transactions. The overall mean for a sale of equity plus debt was 1.5 times revenue. The low was 0.6 times revenue. The high was 3.7 times revenue.

The Deloitte offer for Monitor amounts to about 0.45 times revenue, he said.

"But for the truncated due diligence period, there should be some other buyers with competing bids," Darr told the court. "This is a major undertaking by a major buyer with worldwide reach."

Norman Pernick, committee attorney, said that the asset purchase agreement with Deloitte includes an outside closing date for the sale of Feb. 28.

"We are not asking, as others might, to start at the outside date and work backward. We believe we are striking the proper balance while allowing the committee and the debtors to test the waters," he said.

Other bid procedures

Aside from the timetable, Monitor and Deloitte proposed bid procedures that include:

• Reducing the breakup fee to $3.5 million from $4 million;

• Establishing an initial overbid of $1 million above the purchase price and breakup fee; and

• Setting subsequent bid increments at $500,000.

As originally proposed, the bid procedures called for competing bids to be due by 4 p.m. ET on Nov. 26.

The bids were to be at least equal to the value of the stalking horse bid, plus $4 million in stalking horse protections and a $2 million initial overbid amount.

The auction would have been Nov. 28.

Monitor is a Cambridge, Mass.-based strategy consulting firm. The company filed for bankruptcy on Nov. 7. Its Chapter 11 case number is 12-13042.

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