biaggio Posted January 30, 2013 Share Posted January 30, 2013 Agree with you guys. Hopefully he comes through. Will feel better and less critical then. Link to comment Share on other sites More sharing options...
fareastwarriors Posted January 30, 2013 Share Posted January 30, 2013 more JEF CEO pay news http://dealbook.nytimes.com/2013/01/30/the-rich-math-behind-the-handler-handout/ One of Wall Street’s relative minnows is getting a whale-size paycheck. The Jefferies Group is paying its boss, Richard B. Handler, $19 million for the year to November 2012. That might not sound too rich considering that the Goldman Sachs chief executive, Lloyd C. Blankfein, raked in $21 million. But Jefferies is a much smaller firm, meaning Mr. Handler’s compensation equates to a huge 5.9 percent of earnings Link to comment Share on other sites More sharing options...
Grenville Posted January 30, 2013 Share Posted January 30, 2013 My two cents on Richard Handler's pay: 1. Read Handler's 10 page letter during the misinformation attack in Nov 2011. 2. Brian Friedman and Handler devised and executed a plan that saved Knight Capital and grossed the firm a huge mark to market profit. 3. Friedman and Handler requested their bonus to be 0 in 2011. 4. For 2012 they asked for their bonus to be reduced. 5. Joseph Steinberg & Ian Cumming are both on the compensation committee for JEF. 2012 10K: According to the Pay for Performance program for Mr. Handler, his bonus should have been $8,116,669, but Mr. Handler volunteered to reduce his bonus compensation to $5,000,000, for a reduction of $3,116,669. The subcommittee of the Compensation Committee accepted Mr. Handler’s proposal and awarded him a $5,000,000 cash bonus for fiscal 2012. According to the Pay for Performance program for Mr. Friedman, his bonus should have been $6,087,502, but Mr. Friedman volunteered to reduce his bonus compensation to $3,750,000, for a reduction of $2,337,502, which was proportionately commensurate with Mr. Handler’s voluntary reduction. The subcommittee of the Compensation Committee accepted Mr. Friedman’s proposal and awarded him a $3,750,000 cash bonus for fiscal 2012. 2011 proxy: "In early 2011, the Committee established a 2011 Pay for Performance program for Mr. Handler that included a Base Salary, Cash Bonus and Long-Term Equity Incentive. According to the Pay for Performance program for Mr. Handler, his bonus would have been $4,879,565, but Mr. Handler requested that the Committee exercise its negative discretion to reduce this award to zero. " Link to comment Share on other sites More sharing options...
twacowfca Posted January 30, 2013 Share Posted January 30, 2013 My two cents on Richard Handler's pay: 1. Read Handler's 10 page letter during the misinformation attack in Nov 2011. 2. Brian Friedman and Handler devised and executed a plan that saved Knight Capital and grossed the firm a huge mark to market profit. 3. Friedman and Handler requested their bonus to be 0 in 2011. 4. For 2012 they asked for their bonus to be reduced. 5. Joseph Steinberg & Ian Cumming are both on the compensation committee for JEF. 2012 10K: According to the Pay for Performance program for Mr. Handler, his bonus should have been $8,116,669, but Mr. Handler volunteered to reduce his bonus compensation to $5,000,000, for a reduction of $3,116,669. The subcommittee of the Compensation Committee accepted Mr. Handler’s proposal and awarded him a $5,000,000 cash bonus for fiscal 2012. According to the Pay for Performance program for Mr. Friedman, his bonus should have been $6,087,502, but Mr. Friedman volunteered to reduce his bonus compensation to $3,750,000, for a reduction of $2,337,502, which was proportionately commensurate with Mr. Handler’s voluntary reduction. The subcommittee of the Compensation Committee accepted Mr. Friedman’s proposal and awarded him a $3,750,000 cash bonus for fiscal 2012. 2011 proxy: "In early 2011, the Committee established a 2011 Pay for Performance program for Mr. Handler that included a Base Salary, Cash Bonus and Long-Term Equity Incentive. According to the Pay for Performance program for Mr. Handler, his bonus would have been $4,879,565, but Mr. Handler requested that the Committee exercise its negative discretion to reduce this award to zero. " Outstanding! Link to comment Share on other sites More sharing options...
Kraven Posted January 31, 2013 Share Posted January 31, 2013 In my view all the consternation about Handler's pay package is a lot of wasted energy. Here is a truism for you - Wall Street overpays it's people and pays them more than generously. JEF is an investment bank. Handler runs JEF. Therefore, handler will be overpaid and be paid more than generously. If you don't like it, don't invest in JEF (or now LUK). I mean what's the thought, that he is going to be some guy that takes $100k a year? Come on, what's the difference between making $20 mil and making $18 mil as far as the angst is concerned? Link to comment Share on other sites More sharing options...
biaggio Posted January 31, 2013 Share Posted January 31, 2013 In my view all the consternation about Handler's pay package is a lot of wasted energy. Here is a truism for you - Wall Street overpays it's people and pays them more than generously. JEF is an investment bank. Handler runs JEF. Therefore, handler will be overpaid and be paid more than generously. If you don't like it, don't invest in JEF (or now LUK). I mean what's the thought, that he is going to be some guy that takes $100k a year? Come on, what's the difference between making $20 mil and making $18 mil as far as the angst is concerned? Kraven, you re a wise man + you are probably right. Its just that I would rather have the CEO, "my partner" as Giofranco" would put it, to be concerned with the financial well being of the organization as a whole rather than just enriching himself. I want him to make money with me not off of me (or off of share holder capital). I prefer the frugal partner. At the same time I don t want to be stupid about it. 20 million or 18 million no big deal. Every year for the next 10 years? As long as I am enriched as well I probably will overlook this most likely. It concerns me that you would need to pay your CEO so much. Kind of the opposite of what you normally look for - a good business that any "idiot" could run. Investment banking, insurance, capital allocating- all operations where the management is very important + probably smart to pay them well. Link to comment Share on other sites More sharing options...
Kraven Posted January 31, 2013 Share Posted January 31, 2013 In my view all the consternation about Handler's pay package is a lot of wasted energy. Here is a truism for you - Wall Street overpays it's people and pays them more than generously. JEF is an investment bank. Handler runs JEF. Therefore, handler will be overpaid and be paid more than generously. If you don't like it, don't invest in JEF (or now LUK). I mean what's the thought, that he is going to be some guy that takes $100k a year? Come on, what's the difference between making $20 mil and making $18 mil as far as the angst is concerned? Kraven, you re a wise man + you are probably right. Its just that I would rather have the CEO, "my partner" as Giofranco" would put it, to be concerned with the financial well being of the organization as a whole rather than just enriching himself. I want him to make money with me not off of me (or off of share holder capital). I prefer the frugal partner. At the same time I don t want to be stupid about it. 20 million or 18 million no big deal. Every year for the next 10 years? As long as I am enriched as well I probably will overlook this most likely. It concerns me that you would need to pay your CEO so much. Kind of the opposite of what you normally look for - a good business that any "idiot" could run. Investment banking, insurance, capital allocating- all operations where the management is very important + probably smart to pay them well. I can't disagree with anything you said at all. All very true. I just think one needs to think about the arena in which they are applying their ideals. Why do middling right fielders make $13 mil a year? That's just how it is. People don't like it, don't go to baseball games and don't watch them on tv. Pretty soon the revenue will drop and those kinds of salaries won't be able to be paid. JEF is an investment bank. Bankers want to get paid. That's the environment. It's tough for me to really think about whether one gauges more than another, it's kind of all the same. It's very hard to apply the Buffett ideals to IBs. Handler isn't your partner. He runs a business you (may) happen to have a share in. He doesn't care about you. It is what it is. There's plenty of other businesses, but IBs are going to have over the top pay structures. It will never change. Even when they mess around with making it seem like everyone is taking less, it just gets picked up somewhere else with a wink and nod. Link to comment Share on other sites More sharing options...
roundball100 Posted January 31, 2013 Share Posted January 31, 2013 [...] Why do middling right fielders make $13 mil a year? That's just how it is. People don't like it, don't go to baseball games and don't watch them on tv. Pretty soon the revenue will drop and those kinds of salaries won't be able to be paid. Something must be going right if there is $13m/player per year available in the system. Perhaps the analogy to draw here is that in both ML baseball, and investment banking, there are strong barriers to entry. Otherwise, everyone would be launching their own ML team or league, or bank. Link to comment Share on other sites More sharing options...
racemize Posted February 1, 2013 Share Posted February 1, 2013 Crimson Wine spinoff: http://finance.yahoo.com/news/leucadia-national-corporation-declares-spin-210500459.html Link to comment Share on other sites More sharing options...
scorpioncapital Posted February 2, 2013 Share Posted February 2, 2013 What about when a company founder or leader who develops the business gets shares out of thin air? And then sells it on the open market later on because he wants $$$ to spend? The sums there are much, much larger than any yearly compensation I've ever seen. Link to comment Share on other sites More sharing options...
sampr01 Posted February 2, 2013 Share Posted February 2, 2013 I have LUK options, what happens to those option when they have spin off. Thanks Link to comment Share on other sites More sharing options...
Parsad Posted February 2, 2013 Share Posted February 2, 2013 I have LUK options, what happens to those option when they have spin off. Thanks Nothing. With the spin-off, if the market believes that the wine business is of worth, it may reduce the trading price of LUK once the spin off occurs...meaning you will be further behind on the exercise price of your options if they are presently under water. Cheers! Link to comment Share on other sites More sharing options...
bargainman Posted February 2, 2013 Share Posted February 2, 2013 I have LUK options, what happens to those option when they have spin off. Thanks Nothing. With the spin-off, if the market believes that the wine business is of worth, it may reduce the trading price of LUK once the spin off occurs...meaning you will be further behind on the exercise price of your options if they are presently under water. Cheers! hmm, this is not always true. often times the current option will become an option on the combined entity. I believe this was the case with SHLD when the did the OSH spinoff. But each case is different. Best to check with your broker. Link to comment Share on other sites More sharing options...
Parsad Posted February 2, 2013 Share Posted February 2, 2013 I have LUK options, what happens to those option when they have spin off. Thanks Nothing. With the spin-off, if the market believes that the wine business is of worth, it may reduce the trading price of LUK once the spin off occurs...meaning you will be further behind on the exercise price of your options if they are presently under water. Cheers! hmm, this is not always true. often times the current option will become an option on the combined entity. I believe this was the case with SHLD when the did the OSH spinoff. But each case is different. Best to check with your broker. You could be right Bargainman. May be best to contact Leucadia IR. Cheers! Link to comment Share on other sites More sharing options...
racemize Posted February 2, 2013 Share Posted February 2, 2013 I have LUK options, what happens to those option when they have spin off. Thanks Nothing. With the spin-off, if the market believes that the wine business is of worth, it may reduce the trading price of LUK once the spin off occurs...meaning you will be further behind on the exercise price of your options if they are presently under water. Cheers! hmm, this is not always true. often times the current option will become an option on the combined entity. I believe this was the case with SHLD when the did the OSH spinoff. But each case is different. Best to check with your broker. You could be right Bargainman. May be best to contact Leucadia IR. Cheers! Greenblatt indicated you got both in "You can be a Stock Market Genius" Link to comment Share on other sites More sharing options...
EdWatchesBoxing Posted February 3, 2013 Share Posted February 3, 2013 I remember having an option position in Cardinal Health, before their spin off of Carefusion. I believe I was entitled to options in both. I was pretty sure I got information regarding options treatment from the OCC website. Link to comment Share on other sites More sharing options...
fareastwarriors Posted February 4, 2013 Share Posted February 4, 2013 http://www.bloomberg.com/news/2013-02-04/jefferies-hefty-compensation-is-credit-negative-moody-s-says.html Jefferies Group Inc. (JEF)’s plan to pay two executives $78 million in future incentive compensation poses a negative threat to the firm’s bondholders, Moody’s Investors Service said. “While Jefferies has outperformed its peers, an excessive focus on short-term compensation has been at the root of many outsized trading, credit and litigation losses at investment banks,” Moody’s said today in a report. Even though the awards are subject to three-year vesting, risks can take longer than that to appear, Moody’s said. Jefferies’s board may also be “insensitive” to the concerns of regulators regarding compensation levels, the ratings firm wrote. Link to comment Share on other sites More sharing options...
jay21 Posted February 18, 2013 Share Posted February 18, 2013 I want to dig more into LUK and now JEF is the biggest part of LUK. Two quick questions: 1. How comfortable are people with Handler? What have you read about him and what has he done that makes you think he will be a good CEO of the combined company? I know he brought LUK the Fortescue deal, so maybe he does have a good eye for deals. 2. Everyone mentioned the compensation ratio is high as they are luring talent to the Company. Is this easy to bring down? Will normalized earnings look better? Link to comment Share on other sites More sharing options...
Parsad Posted February 18, 2013 Share Posted February 18, 2013 I want to dig more into LUK and now JEF is the biggest part of LUK. Two quick questions: 1. How comfortable are people with Handler? What have you read about him and what has he done that makes you think he will be a good CEO of the combined company? I know he brought LUK the Fortescue deal, so maybe he does have a good eye for deals. 2. Everyone mentioned the compensation ratio is high as they are luring talent to the Company. Is this easy to bring down? Will normalized earnings look better? 1) He has a very good track record at JEF. Take a look at some of the earlier presentations. 2) I'm of the opinion that if you own a significant portion of the business, you should have enough motivation to perform your best regardless of any other compensation. Unfortunately, not everyone feels this way, and Handler is getting compensation on par with any other financial firm. So either you are ok with it, or you aren't. I think he'll do very well for LUK over time, so I am ok with it for now, as I've become accustomed to seeing this type of plan for CEO's. Doesn't mean I have to like it, nor do shareholder's have to put up with it if he does not perform. Cheers! Link to comment Share on other sites More sharing options...
Parsad Posted February 19, 2013 Share Posted February 19, 2013 Leucadia continues to spinoff or sell non-core assets. Empire Insurance is being sold to White Mountains. No price given. Cheers! http://finance.yahoo.com/news/white-mountains-solutions-acquire-empire-213000982.html Link to comment Share on other sites More sharing options...
jay21 Posted February 23, 2013 Share Posted February 23, 2013 I am starting to dig into LUK again (so I will probably be posting a good amount of questions/thoughts). The first time I looked at them I thought I was out of my circle of competence with some their assets. After re-reading some letters I feel a little more comfortable with what they are doing; it seems like there is a ton of optionality in their assets. But I still have plenty of questions and want to scrutinize all the assets they own and hopefully hear other's opinion. The one slide in the presentation was really good at breaking down the assets that LUK will own once the merger goes through. The combined BV will be 9.1b. Of that ~3b will be net cash and DTA. Thats seems pretty straight forward. Some haircut should probably be applied the DTA. 4b will be JEF, which itself requires plenty of analysis and I may have to ask questions in the JEF thread. The remaining 2.4b is all the other subs. National beef seems to be worth the most at first glance. Spits out ~$100m pre-tax this year and historically higher. The shareholder letters say National Beef is levered towards growing protein consumption in the world. I think I specifically heard mention of opportunities for growth in China. I thought there might be optionality here in a re-inflationary environment. However, they describe National Beef as a spread business (which makes sense given their low margins). So if there is re-inflation or growing demand in emerging markets, National Beef's volume will increase, but more investment will need to be made in PPE. I don't see this as moated company so I imagine the ROIC is low. Is there something I am missing here? Is there option value here or will the nature of the business only result in more PPE with normal ROIC? Or will there be spread widening do to the increased demand? I think LUK described National Beef as the best in their space, so maybe the moat is in good management and good operations? Link to comment Share on other sites More sharing options...
jay21 Posted February 24, 2013 Share Posted February 24, 2013 ....But I still have plenty of questions and want to scrutinize all the assets they own and hopefully hear other's opinion..... LUK has become my largest position (about 30%). I do not scrutinize each and every asset (do not get into "analysis paralysis") since I trust mangement's abilities, integrity and their judgement, and their track record. The only thing I look for is entry points where I can add more at a good discount. I agree for the most part. This is an investment where it is necessary to have a lot of faith in management (much more than maybe any investment I have come across). But, they also have a history of buying distressed and selling them when they become more fully valued. So its important to look at their assets to see where they are in the value realization process. Also, they said they are changing their acquisition philosophy to look for more moated companies. So I think you definitely need to scrutinize the moated assets to see if there is a moat. Are National Beef and Jefferies pillars in the new fortress LUK? Link to comment Share on other sites More sharing options...
cogitator99 Posted February 25, 2013 Share Posted February 25, 2013 Just looking simplistically at the valuation of LUK @ P/B 1.1, would you rather own this or GS? Or perhaps even FFH? Given that we know that Handler will not be like Cumming/Steinberg, and will probably push LUK to be more IB-like in how it is run, would you consider this to be higher quality than its IB peers? Or is it a "simpler" investment because of the bricks-and-mortar businesses from legacy LUK and thus should trade at a premium? Link to comment Share on other sites More sharing options...
jay21 Posted February 25, 2013 Share Posted February 25, 2013 10-K: http://www.sec.gov/Archives/edgar/data/96223/000009622313000013/lnc2012form10k.htm Link to comment Share on other sites More sharing options...
Kiltacular Posted February 26, 2013 Share Posted February 26, 2013 I don't, yet, believe that Handler is simply planning on spinning everything off and leaving JEF as the new LUK. In the presentation regarding the merger they mentioned that this wasn't the plan. But, I think it is worth watching carefully. No reason the worry yet, though. I will also be watching to make sure that C&S keep their stake in LUK. -- In the 10k, I noted that Nat'l Beef had pre-tax income of $59 million. But, this number is net of more than $45 million of "amortization of identifiable intangible assets". This is huge. Adding this back, and Nat'l Beef had cash flow of $114 million in 2012. That $114 million is net of depreciation and, because of the NOL carryforwards, is effectively after tax. The Wal-Mart issue looks like it will hurt but it is hard to tell how much. They say they sell 10% of all of Nat'l Beef's production to Wal-Mart. But, I don't think they're losing all of that. I read the 10k as saying that they are losing just their "case ready" sales to Wal-Mart. They also say that TOTAL "case ready" business for all of Nat'l Beef is 7% of total sales. They do not make it clear how much of their case ready sales go to Wal-Mart. In any case, Nat'l Beef produced some huge returns for Leucadia. If Handler doesn't screw anything up, LUK still appears very cheap to me. Link to comment Share on other sites More sharing options...
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