Avenue challenges Encore Wire-Prysmian merger

Avenue critiques the proposed $290/share merger with Prysmian, claiming it undervalues Encore Wire

Avenue challenges Encore Wire-Prysmian merger

Avenue Investment Management, based in Toronto, has formally shared its concerns about the proposed merger between Encore Wire and Prysmian (BIT: PRY).

Bryden Teich, chief investment officer at Avenue, expressed the firm's appreciation for Encore Wire's management and its consistent performance in a letter to Daniel Jones, CEO of Encore Wire. 

Teich highlighted the strategic advantage of Encore Wire in sectors such as electrification, renewable energy, data center investments, and the onshoring of critical industrial capacity across America.

Representing its partners and clients, Avenue has voiced strong opposition to the merger at the proposed price of $290 per share, arguing that it significantly undervalues Encore Wire's long-term potential and would be disadvantageous for long-term investors.

Teich also praised Encore Wire's consistent profitability through various economic cycles, its high returns on invested capital, low capital intensity, and strong pricing power.

He lauded the company's prudent capital allocation strategy, notably its share repurchase program, which has historically benefited shareholders.

In the shareholder correspondence, Avenue included a detailed analysis projecting Encore Wire's future performance over the next decade in three scenarios.

The analysis suggested that the present value of Encore Wire’s share price after ten years would surpass the proposed $290 merger price, even under conservative estimates.