This morning IVFH quietly announced in an 8-K it has suspended its plan to spin-off The Fresh Diet in order to pursue an offer on the table to sell a majority of The Fresh Diet. While this may very well be a great thing, I do not view it as such. For me, firstly, my investment thesis is busted as it was based on the fact that there would be a spin-off. Secondly, a sale of a company (The Fresh Diet) will be much harder to close in the current environment as opposed to completing a spin-off. Finally, I am troubled that there was no PR associated with this announcement; it is a very material change of potential direction and for no additional commentary to be issued by the company is a bit surprising to me.
I am a seller of the news (will be selling throughout the day) and will revisit the company once a sale or spin-off is concluded. Until then, my investment thesis is busted and I cannot touch it again.
From the 8-K:
As previously announced on November 12, 2015, we have been working to implement a spinoff of our wholly owned subsidiary, The Fresh Diet, Inc. Subsequent to the announcement regarding the spinoff, discussions were initiated by several potentially interested parties with respect to acquiring our wholly-owned subsidiary, The Fresh Diet, Inc.
After evaluating the various offers and weighing them against the spinoff and other options available to The Fresh Diet, we determined that one of the offers was most likely to maximize value for shareholders. Accordingly, on February 9, 2016, we entered into a letter of intent to sell a controlling interest in The Fresh Diet. The terms of the letter of intent contemplate the closing of the transaction within 21 days and, upon closing of the transaction, Innovative Food Holdings will own a non-controlling interest in the outstanding shares of The Fresh Diet. Accordingly, upon closing, the financial statements of The Fresh Diet will be deconsolidated with Innovative Food Holdings’ financial statements and our equity interest in The Fresh Diet will be carried as an asset on Innovative Food Holdings’ balance sheet.
We can give no assurance of any kind that the transaction will be completed. At this time, we no longer intend to spin off The Fresh Diet as we pursue this transaction.