Replies to post #20734 on Medizone Intl. (fka MZEIQ)

[bigmoonshot]

Oops, in the last paragraph I meant to say a memorandum of understanding between the 2 companies while in talks of a possible merger/acquisition.

"Also, I was wondering about the likelihood of an interested buyer of Medizone in forking out the money instead to pay for market research in terms of the market potential of AsepticSure. I feel that the myriad of applications in huge markets will entice a potential buyer(s) to pay for the market research before possible acquisition with a memorandum of understanding between the 2 companies. If the possible acquiring company has done everything in good faith, I don't see why they couldn't share the information as both sides would want fair value."

[Whatisvalue]

Bigmoon, I'll try to address your comments as follows:

It's an interesting premise regarding 3M in acquiring ROL to get into the pest control business with Medizone being the crown jewel in its future business plans. 3M definitely has the money to make the acquisitions and does have an infection control division to take advantage of AsepticSure technology.
A company that has popped up on my radar screen recently is Ecolab. http://www.ecolab.com

Here is the business summary:
Ecolab Inc. engages in the development, manufacture, sale, and service of products that clean, sanitize, and promote food safety and infection prevention. It delivers cleaning and sanitizing programs and services to meet the needs of customers in the foodservice, food and beverage processing, hospitality, healthcare, government and education, retail, textile care, commercial facilities management, and vehicle wash sectors. The company serves customers in approximately 160 countries across North America, Europe, Asia Pacific, Latin America, the Middle East, and Africa. Ecolab Inc. was founded in 1923 and is headquartered in St. Paul, Minnesota.

Furthermore, Ecolab also has a pest control division as well although not as well known as Orkin. This company appears to be an excellent synergistic fit for Medizone. However, I do not believe that they have enough cash to make an acquisition of MZEI (i.e. ...at least not in my greedy estimate, lol) but the two companies can merge with an exchange for shares. This would help shareholders in terms of tax liability as opposed to an all cash acquisition. It's interesting to note that 3M and Ecolab are headquartered in the same city of St. Paul, Minnesota. Maybe these 2 innovative companies can merge together and acquire Medizone together?

You make some good observations re: Ecolabs. In an email to a fellow shareholder yesterday I also discussed Ecolabs as a potential suitor, in fact, likely a better suitor than ROL if MZEI sells peices of applications. Eco has more cash and cash flow to effect the capacity of a larger purchase price. ROL has a modest amount of cash but possesses a number of attributes that might be more enticing for MMM if they are trying to build a pest control business and effect other MZEI applications.

On another topic, I've seen on a number of your posts where you state the immediate need for an investment bank. Is this more of a solicitation for business for your investment firm or more so to appease the impatient shareholder in all of us? Ed Marshall has already stated that he would look into the hiring of an investment bank down the road. I mean no offense when I ask this question. From your perspective, it appears that time is of the essence in the hiring of an investment bank. This I do not understand and I defer to your experience as an investment banker to explain this need now. From my perspective as a large shareholder, I see the company with limited resources where the hiring of an investment banker would mean millions of shares given to Mammoth in this funding purpose for market research with future stock dilution at this ridiculously low stock price. I see the share price going further up with the bedbug news along with possible preliminary sales after FIME. Let's gauge this interest at FIME first before spending this money which may go to use for near production of AsepticSure machines. I can also see the issuing of patents before year end which will add value to the company along with the share price. In short, there is pending news in the near future that would raise the stock price to help reduce the stock dilution. I feel that the wall at 24 cents was due to Mammoth selling their shares for Medizone's earlier drawdown for funds. I don’t negate the need for the hiring of an investment bank down the road especially when the stock price is much higher than it is right now.
I take no offense at your question. I am not now an investment banker, I do manage money for clients (I have only two clients with positions in MZEI at modest levels (while the potential for MZEI is high, the risk is unsuitable for the vast majority of my clients)) and I do provide consulting otherwise. My only self-serving motive is to see the value of MZEI maximized. The "urgency" to gain the services of an investment bank is based upon several factors: 1) the need to assess the various markets (defense, bioterror, health, hospitality, lab, etc.) is a significantly large task for any one market, much less the spectrum of opportunities before MZEI. MZEI doesn't have the staff size or experience to do this work in a timely way and thus far has only offered 'high level' assessments (and we're not sure whether such assessments are potential sales to 100% of the market(s), value to MZEI, annual revenue potential, etc. -- Ed has not defined what such figures measure or what they mean to MZEI. 2) It appears to me that the testing being undertaken for various applications and the patent work will be finished relatively coincidently (before the end of the year). We don't know if MZEI's value is maximized by selling/operating in the whole or in its parts. If MZEI tries to execute various business plans (separate operations, i.e. franchise internally or externally pest control, sell off healthcare, internally operate bioterror, etc.) the management of MZEI gets a lot more complicated, again, exceedingly difficult with modest staff. Further, it's not evident that MZEI has the capital or other resources to effect such a strategy. So, before trundling off in a variety of directions in terms of business complexity, it seems prudent to do more than 'high level' market assessment and develop a thorough strategy intended to maximize value. It will be prudent of MZEI to make some sales in as many of the applications as possible in an effort to "prove the market" but there is a risk that the execution of contracts may muck up or preclude the combined sale of the company if that is desirable. Advice as to how to structure such contracts so as to maintain valuation flexibility would be valuable. 3) the investment bank cas assist MZEI in formulating pricing strategies. Base upon the timing of the above matters, it's not too early to engage the bank(s). An investment bank typically doesn't get paid on the front end of an engagement, hence no impact on limited resources or prospective dilution at low prices. The investment banks take the risk of their effort and typically get paid a % of the deal value at closing. If MZEI was to hire a consultant, the issue you raise would typically be operative. In my view, a fast track process would be 6 months and a more typical engagement would be 9-15 months for the type of project before MZEI. Hence, while I understand the comments about prospective share price increase and intervening activity, such are not an issues as there is no contemplation that a 'deal' would be done in the short-term. Further, in my opinion, market share price is mute if a deal with a F500 is contemplated. The F500 company couldn't care less about the share price of a penny stock of a developmental company. They wouldn't contemplate buying the business on EBITDA, Cash Flow, EPS or some other fundamental metric. Such metrics certainly would be used if an F500 was contemplating the acquisition of ROL, as an example. They will offer a price based upon valuations they internally determine based upon their prospective execution of their own business plans. Likewise, I have no doubt that Ed understands this - but where is the 'professional' help to him in formulating business valuations (part of my prior concern is that, while there is a poison pill of unknown value, an F500 company can make an unsolicited bid for MZEI and there is effectively nothing for the Board to say with respect to an offer being too low, if it is. Management chooses to believe that it has sufficient control/loyalty of shareholders to defend such a takeover, but I view such to be wishful thinking absent the development of a reasoned valuation. Understand that at least 2 F500 firms have been tracking this company for about 1.5 years, they no doubt are doing their own DD and may or may not 'play fair' with Ed's timetable.) Here too, the investment bank can be helpful to MZEI in projecting value of different applications to different suitors (aspect of the business may be more or less valuable to JNJ, MMM, etc.) and the banker can help communicate/justify the maximum value in the negotiation processes. In the instance a suitor is deficient in addressing a particular MZIE application, the banker can evaluate the type of deal I hypothesized in the prior post.

Also, I was wondering about the likelihood of an interested buyer of Medizone in forking out the money instead to pay for market research in terms of the market potential of AsepticSure. I feel that the myriad of applications in huge markets will entice a potential buyer(s) to pay for the market research before possible acquisition with a moratorium of understanding between the 2 companies. If the possible acquiring company has done everything in good faith, I don't see why they couldn't share the information as both sides would want fair value.

I thank you for your consistently thought provoking posts.