Edgetech Services, Inc. (OTCBB: EDGE) edged its way into the spotlight late last month after a Florida-based acquisitions firm offered to acquire 90% of the Company. What seemed so appealing about Edgetech? As we saw in Parts I and II of this story, Edgetech has serious financial concerns that could impair its ability to stay in business. Such considerations did not deter the merger and acquisition specialists at Hollingsworth, Rothwell and Roxford (HRR), which made headlines earlier this year with bids to take over Zapata Corporation and force Sony Corporation to spin-off valuable assets.
Leading us to ask – who is behind HRR?
Ready to Roxford and Roll
What can investors learn about HRR and the men behind the firm? HRR’s web site (www.hrrma.com) describes the entity as a private mergers and acquisitions firm that specializes in finding extremely undervalued companies around the world a nd putting offers together.” But while HRR lists “deals” originated by its principals – with notable companies including Canadian Air, ICN Corporation, Stop & Shop, Placer Dome, Newmont, Gulf & Western - it does not say whether any of those transactions have been consummated. As we noted previously, HRR failed in recent efforts to take over Zapata and force Sony to spin-off its business divisions.The website lists a telephone number for HRR, but when we tried to call a recorded message said it was “temporarily” out of service. A second telephone number, listed on the HRR press releases, was answered by a machine that identified the phone number, but not the firm.
Then there are the principals of the firm. According to HRR’s website, the trio of Hollingsworth, Rothwell and Roxford have been together for twenty years. Still, information about Messrs. Hollingsworth and Rothwell, in particular, is scant. The June 13, 2003 press release announcing HRR’s $15.1 billion lawsuit against Sony Corporation attributes brief remarks to each man, but we have been unable to find any independent information about their professional experience or qualifications as merger-acquisition specialists.
The HRR website does offer a brief, though vague, glimpse of their background, stating that Hollingsworth “has 40 years in electronics, on military contracts, domestic and foreign, including Japan, Southeast Asia, and Europe” and that “Rothwell has 30 years in Navy, Intelligence, Aerospace & Communication electronics and mergers & acquisitions, in Japan, Southeast Asia, Turkey, the UK, the Middle East, Africa, and Australia.” How did they gain that experience? Where did they work, and in what capacity? HRR does not say.
On the other hand, there is considerable information available about the third member of this triumvirate – Theodore Roxford - who claims that he now owns 100% of HRR. Until 1994, Roxford was known as Lawrence David Niren. And while Niren/Roxford reportedly now claims that he is, and always has been, a respectable businessman, he did not always take that position.
In 1995 the San Francisco Chronicle reported that Niren was planning to appear on television to confess to an eight year long scheme to bilk hundreds of publicly traded oil, gas and mining companies out of more than $2 million by collecting consulting fees for services that he never rendered. When clients complained, he deflected their concerns by claiming a death in the family, or a business partner’s heart attack. At the time, Niren told the Chronicle that he “conned because it got me out of bankruptcy.” He had been forced into bankruptcy in 1986 after his former employer, Princeton Economic Consultants, sued him for revealing confidential company information.
Still, it appears that Niren did enjoy certain success. He reportedly earned a $500,000 fee by advising corporate raider T. Boone Pickens to orchestrate a hostile takeover of Newmont Mining Corp.
Niren, who was then negotiating his surrender with the U.S. Attorneys Office, told the Chronicle that he planned to write a book about his escapades. His plans went awry. Victims of his so-called schemes declined to press charges and prosecutors declared that they had no interest in arresting him since the alleged crimes seemed more like civil matters.
So much for that book deal.
It seems that Roxford’s self image has changed since the days of the San Francisco Chronicle interview. Roxford recently told The New York Time that he never was a con man. Instead, he said that it all was just “a publicity stunt to sell a novel.” He claimed he changed his name because he “wrote a controversial novel that talked about the corruption of companies who cheat people.” But the book was never published – so why was the name change necessary?
Meanwhile, HRR’s activities remain shrouded in mystery, and its agenda is difficult to discern. The New York Times noted that Roxford “refuses to provide any substantive information about his partners,” maintaining instead that “[y]ou will not find any information on us because of the highest security clearance for three of the partners.”
On the other hand, Roxford has not been shy when it comes to litigation. Not only has he sued Sony; earlier he filed a federal court lawsuit claiming that he, operating as “Vakil” was entitled to a finder’s fee in connection with an acquisition by Ameritech Corporation. His complaint was dismissed and his appeal was rejected by the United States Court of Appeals for the Seventh Circuit.
Against this background, HRR has said that it is “currently seeking additional affluent partners on a limited basis, in order to make further acquisitions of extremely undervalued companies worldwide in the near future, like Edgetech Services.”
Any takers?
Timing is Everything
Finally we take a peek at several recent stock sales by Edgetech insiders and a Form S-8 registration statement filed by the Company.Since late April 2003, there have been eight separate Forms 144 filed with the SEC by individuals declaring their intention to sell unregistered shares of Edgetech stock. Among those filings – one by Edgetech’s CEO Tae Kim, who filed to sell 300,000 shares (about 5% of his holdings) on July 14th, and one by Edgetech director Frederick Fulcher, who filed to sell 300,000 shares (about 40% of his holdings, on July 15th.
The filings by Kim, Fulcher, and others do not indicate whether any of those shares were sold before the HRR offer boosted the price of Edgetech stock.
On May 9, 2003, the Company filed a Form S-8 Registration Statement, registering 3 million shares of Edgetech common stock under the Company’s “2003 Stock Incentive Plan.” The stock was to be issued to officers, directors, and consultants in exchange for unspecified services. The Form S-8 did not identify the potential recipients by name, describe the services to be rendered, or say whether any of those shares already had been issued. The Company has not filed any amendment to the Form S-8 providing that information.
And, as with the Rule 144 stock, there is no public information indicating whether any of those S-8 shares were sold prior to the HRR tender offer. The aggregate value of those 3 million shares would have soared from about $450,000 on May 15th (the day the Form S-8 was filed) to $1.5 million on July 31st (the closing price on the day after the HRR offer). Based on the intra-day price on July 31st, they would have been worth $2.25 million.
Like we said. Timing is everything.
Delayed Response
Edgetech’s July 31st press release promised that the Board of Directors would meet “and decide on a suitable response [to the HRR offer] within the next week. As of August 10th there had been no public announcement of the Board’s position.There has, however, been a running dialogue about the offer on the Edgetech Message Board on the Raging Bull website. On August 8th a new Raging Bull member, using the moniker hrrma, posted on the Edgetech Message Board a letter that purportedly had been sent from HRR to Edgetech increasing the offer for Edgetech shares from $1 to $1.15 a share. According to that letter, the latest offer was final, non-negotiable, and conditioned upon:
• the execution of a confidentiality agreement;
• prompt completion of due diligence;
• the Edgetech management team staying in place;
• all management and directors pledging to sell all of their shares to HRR at $1.15 a share; and
• the Company immediately releasing a public statement regarding the new offer.
So far, the Company has not issued any public statement indicating that it has received a new offer.
Is Raging Bull’s hrrma actually HRR? The so-called “final” offer letter shares a similar style with the original HRR offer. But the terms of the final offer are perplexing, and do not seem calculated to win support from Edgetech’s management. Why would management agree to remain in place, yet pledge all of their shares to HRR? Isn’t share ownership an incentive for management to make the Company grow?
In any event, hrrma seems determined to use the Raging Bull Message Board as a forum for establishing HRR’s legitimacy. In a series of messages posted on the Message Board on August 9th, hrrma has insisted that HRR has the funds to complete the Edgetech offer; expressed annoyance that anyone might doubt the viability of the Edgetech offer; and recounted the experience of HRR’s partners (including their unspecified roles in a series of vaguely recounted “deals” and market predictions).
According to hrrma, HRR was formed in January 2003, its three partners have worked “with some of the greatest financiers in this business” and “talk with the SEC about everything we do and enjoy talking with them.”
Is hrrma actually speaking for HRR? If so, why has HRR chosen to communicate its “final offer” through a posting on an Internet Message Board?
Oh yes. One more question. With whom at the SEC have they been discussing the Edgetech offer?
And are those talks still enjoyable?
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