prevalou Posted April 6, 2012 Share Posted April 6, 2012 If my interpretation is right, you are mistaken about the cost for FMG to issue a note similar to Leucadia. Look at page 22 in the 10 k. Leucadia would be diluted prorata for its 4% interest. So the winner would be FMG and the looser Leucadia. It would cost FMG nothing or near nothing. Link to comment Share on other sites More sharing options...
jjsto Posted April 6, 2012 Share Posted April 6, 2012 So, I guess the relevant paragraph on page 22 states: "In August 2010, the Company was advised that Fortescue is asserting that FMG is entitled to issue additional notes identical to the FMG Note in an unlimited amount. Fortescue further claims that any interest to be paid on additional notes can dilute, on a pro rata basis, the Company’s entitlement to the stated interest of 4% of net revenue." Under that interpretation, Fortescue could issue an unlimited amount of identical notes at a minimal cost that would fully dilute the existing LUK notes? In that case, the only thing currently preventing Fortescue from doing that would be the Writ of Summons filed by LUK in Sept 2010? Link to comment Share on other sites More sharing options...
tombgrt Posted April 6, 2012 Share Posted April 6, 2012 That was my interpretation of that paragraph as well jjsto. That's why I'm hoping the letter to shareholders brings more clarity about the issue. Link to comment Share on other sites More sharing options...
prevalou Posted April 6, 2012 Share Posted April 6, 2012 It is my interpretation too unless prorata has a signification i ignore Link to comment Share on other sites More sharing options...
scorpioncapital Posted April 6, 2012 Share Posted April 6, 2012 -"Fortescue Metals Aims to Raise $1 Billion by Issue of Junk Bonds" "Fortescue Metals Group Ltd. (FMG.AU) has secured $2 billion through a bond issue for the expansion of its iron ore-mining operations in Western Australia, twice the amount it had set out to raise, the mining company said Thursday. " "Fortescue last sold bonds in October, when it issued $1.5 billion of 8.25% eight-year senior unsecured notes. " I think this is exactly what is happening - FMG is able to raise money in debt markets, so diluting the LUK royalty, is a last resort - especially with the litigation. Andrew was probably up against the wall when he thought no other way to raise money except to dilute the royalty to LUK. Since the wall has gone away so far and LUK's aggressive stance, it wouldn't pay to go that route. Link to comment Share on other sites More sharing options...
prevalou Posted April 6, 2012 Share Posted April 6, 2012 FMG can wait until the litigation is over and they prevail (hopefully for them before 2019!) to dilute LUK. Link to comment Share on other sites More sharing options...
link01 Posted April 7, 2012 Share Posted April 7, 2012 According to 8K posted today it looks like National Beef earned 221 mil + 52 mil(D&A) = 273 mil and since LUK has NOL assets they will not be paying any taxes on this earning. This seems very good deal at the price of 870 mil. Am I miscalculating something here? http://www.sec.gov/Archives/edgar/data/96223/000090951812000089/mm03-0512_8kea1991.htm not sure you should add back the D&A, at least not the depreciation....adding back depreciation - normalized capex plus amortization assuming, ok. but the NOL's wont need to shield that portion of cash earnings because its not taxable anyway. more importantly NBP was an LLC so its earnings were pass-tru to the partners, i believe, & taxable mostly at the partner level. i think thats why we see only an insignificant income tax liabilty on the NBP staement of income. so those 221mln of earnings taxed at a ordinary 40% fed/state income rate for a C Corp would equate to 137mln after tax. luk's 80% share of that equals 109mln not counting their ability to shield those earnings with their NOL's. so that means luk bought at just under a 8 after tax PE. i dont have a feel for how sustainable or normalized those 2011 earnings of 221mln are either. i noticed that they earned 143mln in 2009 so they've added almost 80mln to earnings in 2 yrs, a 50% increase. i wonder how the pink slime controvery will affect 2012 earnings? interestingly, NBP tried to do an IPO in 2009 or 2010 but backed out do to low valuation in the markets. in 2009 they had also accepted a buyout offer from JBS s.a for 560 mln but that was called off for anti trust reasons. that would have been a 3.9 pretax PE purchase, cheaper than luk's today, btw, assuming thay were contemplating a 100% buyout vs luk's 80%. here are 2 links: http://www.bizjournals.com/kansascity/stories/2009/02/16/daily40.html http://seekingalpha.com/article/178529-will-investors-be-hungry-for-national-beef-ipo Link to comment Share on other sites More sharing options...
link01 Posted April 7, 2012 Share Posted April 7, 2012 FMG can wait until the litigation is over and they prevail (hopefully for them before 2019!) to dilute LUK. FMG can wait until the litigation is over and they prevail (hopefully for them before 2019!) to dilute LUK. well, they'll have to win the lawsuit 1st & then be willing to suffer even more reputational damage if it appears they won on a technicality due to some poor contract agreement wording on luk's part that failed to nail down their INTENT according to the letter of the law. which could be the case judging form luk mngts kind of sheepish tone, imo, that i think i detected in some of their comments. or it could just be that they are annoyed at themselves for misjudging andrew "twiggy" forrest in the beginning. Link to comment Share on other sites More sharing options...
prevalou Posted April 7, 2012 Share Posted April 7, 2012 Anyway, from Leucadia point of view, it seems to be a risk and it is difficult to price this risk, or to dismiss it. Link to comment Share on other sites More sharing options...
tombgrt Posted April 11, 2012 Share Posted April 11, 2012 In any case, current share price is under BV again. Guessing something of 0.9x not adjusting for DTA and FMG note. I have been looking to buy more but haven't pulled the trigger yet because it's such a big position already. Reread some annual letters in anticipating of the new one this week or the next. More details on succession plan on the way? We'll see! Our Board of Directors continues to urge us to provide a succession plan. We have been working hard on that problem for several years. We have made some progress and hope by next year it will be more palpable. Link to comment Share on other sites More sharing options...
scorpioncapital Posted April 11, 2012 Share Posted April 11, 2012 hopefully this friday on the letter. Link to comment Share on other sites More sharing options...
Parsad Posted April 11, 2012 Share Posted April 11, 2012 In any case, current share price is under BV again. Guessing something of 0.9x not adjusting for DTA and FMG note. I have been looking to buy more but haven't pulled the trigger yet because it's such a big position already. Reread some annual letters in anticipating of the new one this week or the next. More details on succession plan on the way? We'll see! Our Board of Directors continues to urge us to provide a succession plan. We have been working hard on that problem for several years. We have made some progress and hope by next year it will be more palpable. You can't really teach what they do. And the stuff they buy isn't as straight forward as the businesses Berkshire, Markel or Fairfax buy where there is management in place and they are businesses that are working just fine. Succession is going to be very difficult at Leucadia if both are gone. Cheers! Link to comment Share on other sites More sharing options...
tombgrt Posted April 11, 2012 Share Posted April 11, 2012 Correct Parsad. On the other hand, their employment agreements won't expire until June 30th 2015. A minimum of 3 years more of their magic plus a price under - imo slightly understated - book value is a good deal if you ask me. Link to comment Share on other sites More sharing options...
scorpioncapital Posted April 11, 2012 Share Posted April 11, 2012 I disagree, I think LUK owns mostly public shares and profitable private businesses. This is exactly like Berkshire. If Buffett stops buying new companies, Berkshire return = return of existing businesses. Same with LUK. Somebody is always making new investments until they stop - then somebody else has to do it. No guarantee the next person is any good. I only see a marginal difference in the selling strategy, but the current investments can be held indefinitely either way. Link to comment Share on other sites More sharing options...
Parsad Posted April 11, 2012 Share Posted April 11, 2012 I disagree, I think LUK owns mostly public shares and profitable private businesses. This is exactly like Berkshire. If Buffett stops buying new companies, Berkshire return = return of existing businesses. Same with LUK. Somebody is always making new investments until they stop - then somebody else has to do it. No guarantee the next person is any good. I only see a marginal difference in the selling strategy, but the current investments can be held indefinitely either way. Many of their businesses, especially in the past, were distressed turn around situations. As long as they stick to things like Jefferies, Mueller, National Beef Packing, etc, it will be fine. But if you find situations where they are buying things that are distressed, in need of a turnaround, or complicated...think Finova or Berkadia...then it is going to be difficult to replicate that ability. They are the best at what they do...pure Ben Graham distress plays, tax losses, analyzing complex financial structures...two brilliant guys! That's much harder to replace than Buffett where the company is slowly being put onto auto-pilot. Even at Fairfax, with Andy Barnard in place and so much depth at Hamblin-Watsa, Prem is putting together a good succession plan. What you can't replace with Buffett and Prem is leadership. And Cummings and Steinberg are also two good leaders. Cheers! Link to comment Share on other sites More sharing options...
tombgrt Posted April 13, 2012 Share Posted April 13, 2012 Letter is out! ;) http://www.leucadia.com/c-p_letters/luk_c-p2011.pdf Link to comment Share on other sites More sharing options...
bookie71 Posted April 14, 2012 Share Posted April 14, 2012 Thanks for posting Link to comment Share on other sites More sharing options...
tombgrt Posted April 19, 2012 Share Posted April 19, 2012 -- Leucadia National has announced that it expects to win a lawsuit against Fortescue Metals Group. The two companies have been locked in a dispute since 2006 when Leucadia, a former cornerstone investor in the iron ore producer, sued Fortescue after it attempted to replicate a royalty note issued in 2006. Leucadia is trying to prevent the Australian miner from issuing further notes, which provide a 4 percent return on profits at certain projects. Page B3. http://www.reuters.com/article/2012/04/18/digest-australia-business-idUSL3E8FI7CN20120418?feedType=RSS&feedName=rbssFinancialServicesAndRealEstateNews&rpc=43 The dispute isn't from 2006 but ok.. If this is true we can adjust BV a couple of dollars. 8) Link to comment Share on other sites More sharing options...
tombgrt Posted April 19, 2012 Share Posted April 19, 2012 Nothing "new" was announced, just a rehash of what the annual letter said. :-X http://www.smh.com.au/business/leucadia-bullish-on-fortescue-row-20120418-1x7lo.html Link to comment Share on other sites More sharing options...
txlaw Posted April 24, 2012 Share Posted April 24, 2012 Mad cow found in Cali. http://www.bloomberg.com/news/2012-04-24/mad-cow-case-confirmed-in-central-california-usda-says.html Could potentially have a big impact on National Beef volumes in the short term. Link to comment Share on other sites More sharing options...
txlaw Posted May 4, 2012 Share Posted May 4, 2012 Results and 10-Q are out: http://www.sec.gov/Archives/edgar/data/96223/000009622312000019/lnc1stqtr2012pressrelease.htm http://www.sec.gov/Archives/edgar/data/96223/000009622312000017/lnc1stqtr2012form10q.htm Link to comment Share on other sites More sharing options...
racemize Posted May 4, 2012 Share Posted May 4, 2012 I believe that puts BVPS at 26.35 (above today's price). Link to comment Share on other sites More sharing options...
racemize Posted May 7, 2012 Share Posted May 7, 2012 I'm surprised it is down today, I thought we'd at least get to book. Link to comment Share on other sites More sharing options...
tombgrt Posted May 7, 2012 Share Posted May 7, 2012 Take a look at National Beef "earnings" (seasonality I guess?) and Inmet's stock today. No need to follow LUK that closely, value will come out over time. ;) Link to comment Share on other sites More sharing options...
PlanMaestro Posted May 8, 2012 Share Posted May 8, 2012 From Good Haven: less than 4% of assets are Level 3 and that represents 14% of equity. Link to comment Share on other sites More sharing options...
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