Jeremy Raper goes activist on Hunter Douglas $HDG

Episode Summary

Executive Summary: Jeremy Raper argues that Hunter Douglas’s $64/share takeover bid is deeply unfair and process-tainted. He says the family-controlled, illiquid, high-quality global blinds/curtains leader is being acquired at a massive discount to intrinsic value, using incomplete information, conflicted advisors, and a coercive squeeze-out threat. He believes minorities may be better off resisting and forcing a court-based valuation or a materially higher bump.

Main Topics: Hunter Douglas business quality and market position (Priority: 5/5): Jeremy describes Hunter Douglas as the global leader in windows, blinds, drapes, and curtains, with strong brands, local manufacturing moats, and oligopolistic positions in many markets. Despite being cyclical, he argues it is a high-quality, well-managed business with durable earnings power. Take-private bid and valuation disconnect (Priority: 5/5): The core dispute is the founder’s €64/share offer, which Jeremy says values the company far too cheaply versus earnings, cash flow, comparable companies, and precedent transactions. He frames the bid as roughly half of fair value, with upside potentially far above the offer price. Corporate structure, control, and squeeze-out mechanics (Priority: 5/5): A major issue is the Curaçao domicile, which lowers the squeeze-out threshold relative to Dutch law. Jeremy explains how founder Ralph Sonnenberg’s 84% common ownership plus preferred share voting rights may already meet the Curaçao squeeze-out standard, shaping leverage in the deal. Abusive deal process and conflicts of interest (Priority: 5/5): Jeremy argues the process was manipulated: the founder approached the board before public release of strong Q3/Q4 results, the independent committee recommended the deal with conflicted advisors, and the committee members allegedly held no shares and lacked alignment with minorities. Comparable companies and precedent transaction analysis (Priority: 4/5): He disputes the committee’s valuation logic, arguing its selected comps were still controlled businesses and that the better comp set implies a much higher price. He also cites a prior transaction (Spring Window) at 11x EBITDA in a worse market as evidence the offer is too low. Squeeze-out and litigation strategy (Priority: 4/5): Jeremy believes minorities may be best served by not tendering and forcing a court appraisal or squeeze-out proceeding, where value could be reset closer to fair value. He notes Dutch/Curaçao legal remedies and mentions shareholder group VEB as a possible avenue for action.

Key Arguments: Hunter Douglas is a high-quality global leader with defensible local-market advantages, not a commodity business deserving a steel-like multiple. The €64/share bid is materially below intrinsic value; he believes fair value starts around €118.50/share and could be closer to €160/share. The offer was timed before public disclosure of strong operating results, so the stated premium was calculated against an artificially depressed stock price. The independent committee’s fairness rationale is undermined by conflicts, lack of share ownership, and a weak or undisclosed DCF. The committee wrongly dismissed peer companies as non-comparable or non-controlled, even though many were family- or insider-controlled themselves. The transaction appears to serve the founder’s estate/succession planning rather than minority shareholders’ economic interests. Minorities may have a strong legal and negotiating position because a squeeze-out or court appraisal could produce a much higher outcome than tendering at €64. A lower acceptance rate could still lead to a squeeze-out attempt in Curaçao, but that process may favor a fairer valuation than the current bid.

Data Points: Bid price: €64/share - Founder holding company’s take-private offer announced in mid-December Premium at announcement: ~20% to 25% - Premium over the stock price at the time of the initial offer Founder ownership of common stock: 84% - Ralph Sonnenberg’s direct ownership of the common shares Founder voting rights including prefs: 91.6% - Under Curaçao treatment of preferred shares as nominal capital Squeeze-out threshold in Curaçao: 90% - Potential legal threshold to force minority holders out Squeeze-out threshold in Holland: 95% - Higher threshold under Dutch law Market cap: ~€2.5 billion - Approximate size of the listed company Trading volume: ~€250–300 million - Annual/illustrative liquidity level cited as very low 2020 Q4 EBIT growth: ~50% to 55% YoY - Strong recovery in the fourth quarter as cited during COVID rebound 2020 top-line growth: ~15% to 16% YoY - Revenue growth mentioned alongside EBIT rebound Free cash flow yield at offer: ~20% - Jeremy’s estimate on conservative 2021 earnings power EV/EBITDA at offer: ~4x to just over 5x - Valuation implied by the €64 bid depending on normalization Normalized earnings multiple: ~9.5x to 10x - Implied by the offer based on net income Comparable transaction multiple: 11x EBITDA - Spring Window precedent transaction in 2018 in a worse market Fair value estimate from comp analysis: €118.50/share - Implied by the activist Dutch comp analysis discussed on the podcast Alternative fair value view: ~€160/share - Jeremy’s view of a more realistic value if fully triangulated Preferred shares owned by Sonnenberg: 100% - He owns all preferred shares, which affect voting calculations

Pivotal Quotes: "the most egregious expropriation of value by a Dutchman since Peter Minuet bought the island of Manhattan from the Indians for 60 guilders in 1626" — Jeremy Raper: His vivid description of the alleged unfairness of the takeover price and process "there’s no reason why my representation on the board, who’s meant to have my best interests at heart as a shareholder, should sign off on a robbery" — Jeremy Raper: On the independent committee’s recommendation of the €64 offer "I do think there is scope for some kind of... ability for the offerer to kind of make amends" — Jeremy Raper: On the likelihood that the bid must be meaningfully bumped to avoid litigation or a squeeze-out fight

Implications: The episode highlights how control, domicile, and process can overwhelm headline premiums in take-private deals. For minority investors, it shows the importance of legal rights, tender strategy, and valuation discipline when a dominant owner tries to buy out the float.