Clarke Inc. Special Situation(s)

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Clarke Inc. TSX:CKI Special Situation(s) – Sailing on the go-private ferry

Disclosure: We are long this stock and their debentures.

Clarke Inc. TSX: CKI is a neat collection of businesses and assets. It’s also probably being taken private shortly and has a special situation trade for you in the meantime. What’s the deal?

• It is trading at below its stated book value (which seems reasonable and likely has suppressed value).

• They are several years into a business simplification. They have sold off/dividended-out various public holdings (TerraVest – their case study at end – and Trican; both interesting investments) and are now focusing on their three business units.

• They have been consistently repurchasing shares for the last three years (15% cumulatively) and just renewed their NCIB. Now that they have cleared up the convertible debentures (see next), it is likely that they are going to be taken private soon.

• We looked at Clarke back in 2021. Unfortunately, we did not buy, and it went straight up ~100% since. At the time their operations were messier and the majority of their business at the time (hotels and a ferry) were severely impacted by COVID.

• They key 75% shareholder, G2S2 (run by Clarke’s Chairman) just put in the funds to repurchase the debentures. This is his party – “On June 30, 2020, Michael Rapps, former President and Chief Executive Officer of the Company, resigned and George Armoyan, Clarke’s Chairman, was appointed President and Chief Executive Officer.”

• The only other large shareholder is 13% owner Letko Brosseau & Associates Inc. This might provide some comfort for small shareholders getting a fair deal (unless they also continue holding with G2S2 in a go-private transaction).

First - The short-term trade: