Fuel Systems Solutions, Inc. (FSYS)

[Democritus_of_Abdera]

Re: WPRT x FSYS...

Stemcell, in that you have been an active participant on the Westport board (#board-13284), do you have any thoughts as to what WPRT plans to do with the approximately $275M it raised from last week’s share offering (#msg-72390903).

The reason I ask is that Westporter2010 has been speculating on the yahoo message board (YMB) that WPRT might acquire FSYS; a speculation shared by Sandyeggojake (per a Jan 24 YMB post). Westporter2010’s thesis is based largely on the following three observations:

1) WPRT’s stock has strongly outperformed that of FSYS during the past two years resulting in a large discrepancy in the valuations. As stated by Westporter2010 in a Jan 31, 2012 YMB entry:

WPRT has an enterprise value of about $1.6 billion [now about $2.0B], which equates to about seven times projected fiscal (March) 2012 sales. Fuel Systems Solutions had an enterprise value of about $300 million [now about $0.48B], which equates to less than one times trailing 2011 and projected 2012 sales. Both companies have gross margins in the 30% to 40% range, so it's unclear why a dollar of sales for Westport should be valued so much more than a dollar of sales for Fuel Systems.

2) Kevin Douglas (as trustee of the James Douglas and Jean Douglas Irrevocable Descendants’ Trust) is a >5% shareholder of both WPRT and FSYS. Notably, he has been dramatically increasing his positions in FSYS recently (adding 375,500 shares to his FSYS holdings last month to bring his total to greater than 10% of the FSYS outstanding shares).

3) Douglas King has been recently appointed to the WPRT BoD. He had been on the FSYS BoD from Apr 2006 to July 2010.

This speculation was supported by the following statement (which I cannot confirm) by armarez70 on the Feb 9, 2010 FSYS YMB:

I recently heard one of the vice presidents of FSYS say that the two main companies of the group, IMPCO and BRC, will go separate ways before the end of the mandate of the current CEO (2012), who's not likely to make it to the a second term because of internal strategical disagreements, and some "controversial" managerial style. Allegedly, that's why FSYS is already neatly divided in two different operations and vice-presidencies.

I must take armarez70’s statement with a substantial grain of salt until there is independent evidence supporting this rumor... Nevertheless, I find some merit to the idea that WPRT might acquire the IMPCO division of FSYS, leaving the BRC division to the Costamagna brothers given the history of the union in 2003-2005 (see #msg-64495472).