Well that was much more of an interesting divestiture than I ever expected. The JV and non-compete with Unistrong is worth a helluva lot IMO, and a VERY positive happening. Some notables from the release


* Based on sales of only $13.3mm for the year, it was clear that the non-core segment was simply not performing. It looks like Q4 non-core sales were down as much as 23%.

* I thought the company would only get $7.5mm for the divestiture unless IP went with the sale. Looks like that's exactly what happened. So we get $15mm in proceeds (not sure if net or gross, probably gross). Doing some quick math and backing out an estimate Q4 cash burn rate + revised restructuring cash cost (say $5mm) and factor in 1mm of restricted cash for Agjunction sales targets being hit in 2013/2014 leaves the company with net $7 to $7.5mm in cash and no debt (I am assuming EDC debt to be taken out). Overall this is a tremendous outcome.

* Re-branding is intended to cleanse the past: The company is clearly sending a strong message that the past is exactly that. Of course we'll have to wait and see what transpires over the next 1-2 years, but renaming the company is intended to disassociate with all the negativity that former management created with shareholders under the old HEM brand. Also this will give sell side brokers a "new story/name" to give prospective shareholders. A good move by the company, although I would have preferred an association with Outback given it's strong brand recognition vs. Agjunction.

* Ag related revenues are up YTD: This is a subtle hint that 2013 is shaping up to be a record year for the core division. Look for more commentary on this during the conference call

* Outback MAX and Connx getting positive reception: Anyone that does their diligence already knew this but good to see some validation

* Restructuring costs below expectations: This almost NEVER happens. I would call this a very pleasant surprise.


Overall I expect to see a very positive reaction to the share price resulting from this news. Besides the value of the partnership and strong balance sheet, the value of $15mm for a non-performing segment that was just 20% in sales, experiencing negative growth and burning cash should be taken with great enthusiasm. In other words, if non-core was worth 15mm, then it demonstrates that the core division has a helluva lot of embedded value in it that the street/market has yet to recognize. We could finally be seeing a $2.00+ share price in the not too distant future, although it may take a bit of time for investors to catch on to the story.