Parsad Posted October 19, 2012 Share Posted October 19, 2012 But at times where there are limited attractive deals it makes sense for them to redeem debt given their circumstance of limited op cash flows and poorer credit rating. Valuecfa, I agree with you and given what they said at their annual meeting -- regarding it's "scary" out there, etc. -- at first that is all I thought they were doing when they did the Fortescue deal...just closing that one down opportunistically and possibly worried that Chinese demand for ore was headed in the wrong direction longer term. My comment about the world coming to an end was facetious. So, you could be right that they are just pulling in their horns. I may be guilty of just "hoping" here. But, it does seem like they hope they've got something big brewing. They always fund to watch, in any case. I'm pretty sure they've got something big brewing. We'll know soon enough. Cheers! Link to comment Share on other sites More sharing options...
scorpioncapital Posted October 20, 2012 Share Posted October 20, 2012 Look at the 2011 annual letter. The wording of the letter about MLI and the FMG note suggests they had absolutely no intention of selling around April 2012. They considered them good medium term investments. I'm not sure how wise it is to sell assets to bid on auction you may not win - what happens if you lose? I'm thinking they either have a signed agreement on something (or the odds are far higher than 50% of a deal being made) or their view of the climate has changed. Link to comment Share on other sites More sharing options...
Parsad Posted October 20, 2012 Share Posted October 20, 2012 Look at the 2011 annual letter. The wording of the letter about MLI and the FMG note suggests they had absolutely no intention of selling around April 2012. They considered them good medium term investments. I'm not sure how wise it is to sell assets to bid on auction you may not win - what happens if you lose? I'm thinking they either have a signed agreement on something (or the odds are far higher than 50% of a deal being made) or their view of the climate has changed. FMG needed to buy their note, so that they could issue more debt in the future. Without LUK's approval, no new debt could be issued. But yes, with MLI, they had no plans on selling. From everything I know about these guys, they have either a new target or they are buying more of something they already own. Cheers! Link to comment Share on other sites More sharing options...
JRH Posted October 31, 2012 Share Posted October 31, 2012 More speculation on a Leucadia takeover target - Whitehaven Coal in Australia: http://www.businessspectator.com.au/bs.nsf/Article/Nathan-Tinkler-Whitehaven-board-Endcoal-Elders-Rur-pd20121030-ZJRCF?OpenDocument And a little more background info on the situation: http://www.reuters.com/article/2012/10/31/us-australia-whitehaven-idUSBRE89U0BI20121031 Link to comment Share on other sites More sharing options...
Grenville Posted October 31, 2012 Share Posted October 31, 2012 More speculation on a Leucadia takeover target - Whitehaven Coal in Australia: http://www.businessspectator.com.au/bs.nsf/Article/Nathan-Tinkler-Whitehaven-board-Endcoal-Elders-Rur-pd20121030-ZJRCF?OpenDocument And a little more background info on the situation: http://www.reuters.com/article/2012/10/31/us-australia-whitehaven-idUSBRE89U0BI20121031 Thanks for the links and the post. Will be interesting to see how LUK puts their liquidity to work. Link to comment Share on other sites More sharing options...
shoeless Posted October 31, 2012 Share Posted October 31, 2012 http://www.kplctv.com/story/19942882/lake-charles-clean-energy-project-would-create-1500-construction-jobs "Having secured a 25-year operating agreement with the Port of Lake Charles -- the Leucadia Corporation is set to invest $2.5 billion in the nation's first gasification plant." Link to comment Share on other sites More sharing options...
racemize Posted October 31, 2012 Share Posted October 31, 2012 http://www.kplctv.com/story/19942882/lake-charles-clean-energy-project-would-create-1500-construction-jobs "Having secured a 25-year operating agreement with the Port of Lake Charles -- the Leucadia Corporation is set to invest $2.5 billion in the nation's first gasification plant." from the article: LCCE was awarded $1.56 billion of Gulf Opportunity Zone ("GO Zone") and Hurricane Ike taxexempt bonds by the Louisiana State Bond Commission. The issuance of these bonds demonstrates the state of Louisiana's strong financial support for the project. The low-cost GO Zone financing provided by the state was a large incentive to develop the project in Lake Charles. It also says it will cost 2 billion over the 25 years, so I wonder how much Leucadia had to put up front given those data points. Link to comment Share on other sites More sharing options...
JRH Posted October 31, 2012 Share Posted October 31, 2012 http://www.kplctv.com/story/19942882/lake-charles-clean-energy-project-would-create-1500-construction-jobs "Having secured a 25-year operating agreement with the Port of Lake Charles -- the Leucadia Corporation is set to invest $2.5 billion in the nation's first gasification plant." From the 2010 Annual Report (released spring 2011): "Each of these projects is extremely capital intensive and highly vulnerable to interest rates, inflation, current and expected long-term natural gas prices, and final receipt of various regulatory, permitting and financing approvals. Given that each of these projects range in size from $2.3 billion to $2.6 billion, or more, Leucadia may begin to seek partners sometime this year to share the costs." The article you posted is the first substantive mention with additional information I recall seeing since that time: "The release states that a final investment decision in the project remains subject to third party financing and board approval by Leucadia National Corporation. As part of its financing efforts, Lake Charles Clean Energy has retained Credit Suisse AG and its affiliates, Citigroup and its affiliates, and Jefferies & Company, Inc. and its affiliates to provide advisory services related to potential placement of project equity. According to the release, the project represents a capital investment of more than $2.5 billion..." Sounds like Leucadia is looking for partners? It'll be interesting to see a number finalized on Leucadia's share of the equity investment... Link to comment Share on other sites More sharing options...
Grenville Posted October 31, 2012 Share Posted October 31, 2012 http://www.kplctv.com/story/19942882/lake-charles-clean-energy-project-would-create-1500-construction-jobs "Having secured a 25-year operating agreement with the Port of Lake Charles -- the Leucadia Corporation is set to invest $2.5 billion in the nation's first gasification plant." Thanks! Interesting. Here's a link to the projects website. http://www.lakecharlescleanenergy.com Link to comment Share on other sites More sharing options...
shoeless Posted October 31, 2012 Share Posted October 31, 2012 Time to read up on methanol a bit. Came across this http://www.blogvesting.com/2008/09/27/taking-a-position-in-methanex-meoh/ Link to comment Share on other sites More sharing options...
txlaw Posted October 31, 2012 Share Posted October 31, 2012 LCCE is expected to be one of the world's lowest-cost producers of methanol and hydrogen and a low-cost producer of other products used in the chemical and refining industries. In addition to extraordinary limitations on emissions of Criteria Pollutants, the plant is designed to capture, compress and sell 90 percent of its carbon dioxide ("CO2") production for use in Enhanced Oil Recovery ("EOR") in the US Gulf Coast," a news release from LCCE states. See, I love this. I once looked into ZINC after I saw it in Pabrai's portfolio. They are also a low-cost producer of products that use waste/byproduct materials as a feedstock. But the problem I had with ZINC is that it was just a couple of plants, and if those things blew up or something happened to them, it would be game over, and I was never able to get in at a price that I liked to compensate me for that risk. Now the great thing about owning LUK is that you get a low cost producer like this in a portfolio of assets that generate wealth that will be corporate tax free. Once again, these guys prove they are the smartest guys in the room -- but for real, not like those Enron d-bags. Really interested to see how they are going to finance this project. Link to comment Share on other sites More sharing options...
txlaw Posted October 31, 2012 Share Posted October 31, 2012 http://www.netl.doe.gov/publications/factsheets/project/FE0002314.pdf Damn government and their subsidies to industry! Link to comment Share on other sites More sharing options...
Guest Dazel Posted October 31, 2012 Share Posted October 31, 2012 Leucadia guys are brilliant! You gotta love how smart they are. Link to comment Share on other sites More sharing options...
motownsf Posted October 31, 2012 Share Posted October 31, 2012 Wonder who would work on it with them? On second thought, a PE fund isn't likely due to duration of the project. Leukadia will need someone more longterm. Link to comment Share on other sites More sharing options...
Hawk4value Posted October 31, 2012 Share Posted October 31, 2012 Wonder who would work on it with them? On second thought, a PE fund isn't likely due to duration of the project. Leukadia will need someone more longterm. How about Warren??? Link to comment Share on other sites More sharing options...
Parsad Posted November 1, 2012 Share Posted November 1, 2012 Wonder who would work on it with them? On second thought, a PE fund isn't likely due to duration of the project. Leukadia will need someone more longterm. How about Warren??? If it's a good idea and there is money to be made, you can bet Berkshire or MAE would work with them. On another note, how about another guy named Watsa? Cheers! Link to comment Share on other sites More sharing options...
OracleofCarolina Posted November 6, 2012 Share Posted November 6, 2012 LUK results http://finance.yahoo.com/news/leucadia-national-corporation-announces-nine-222400741.html Link to comment Share on other sites More sharing options...
Parsad Posted November 6, 2012 Share Posted November 6, 2012 Walmart is pulling their case-ready business from National Beef. No impairment yet, but they may take one at some point if they cannot find replacement business for their two case-ready facilities. Accounts for about 7% of sales, but higher on the net margin side for those products. A bit of a hit, but not too significant. I suspect they will replace some of that space with new customers. Cheers! Link to comment Share on other sites More sharing options...
frog03 Posted November 7, 2012 Share Posted November 7, 2012 Deferred tax asset still a huge portion of BVPS. Excluding the tax asset, the book value as of Q3 is about $19. Link to comment Share on other sites More sharing options...
WhoIsWarren Posted November 7, 2012 Share Posted November 7, 2012 Deferred tax asset still a huge portion of BVPS. Excluding the tax asset, the book value as of Q3 is about $19. Yes, you could look at it that way. But to value Leucadia like this doesn't recognise that the post-tax profitability of Leucadia's businesses (or its post-tax capital gains) will be higher than they would otherwise be in the absence of the DTA. Perhaps you are of the view that Leucadia won't make sufficient profits to utilise all the DTA, but I'm willing to bet they will. Regardless of how you take my argument above, you should note that the zero coupon bonds issue wasn't sorted until after the balance sheet date. This was a pre-tax gain of $526m. I'm not sure how much tax they'll have to pay on that, but even assuming 15% capital gains tax rate it gives them $450m additional equity. This adds $1.8 per share to book value, unless I've got my sums wrong. Without wanting so split hairs, Inmet and Jefferies are up somewhat on their end-September valuations, which adds around another bit to book value. Making the above adjustments puts tangible equity, notwithstanding my above comments, at around $21.5. Link to comment Share on other sites More sharing options...
scorpioncapital Posted November 7, 2012 Share Posted November 7, 2012 "This was a pre-tax gain of $526m" Maybe they don't pay any? I think I read once that cap gains are included in the DTA and can be used against that just as much as income. Link to comment Share on other sites More sharing options...
Kraven Posted November 12, 2012 Share Posted November 12, 2012 Leucadia buying Jefferies. 0.81 shares of LUK for each share of JEF. At current price around $17.65 for JEF; aggregate around $3.7 bil. Link to comment Share on other sites More sharing options...
orion Posted November 12, 2012 Share Posted November 12, 2012 Their presentation: http://www.leucadia.com/presentations/presentation_11_12_12.pdf Link to comment Share on other sites More sharing options...
Sportgamma Posted November 12, 2012 Share Posted November 12, 2012 Jefferies currently pays substantial Federal income taxes and thus its expected ongoing pre-tax earnings will materially accelerate utilization of Leucadia’s net operating losses, creating incremental value for all shareholders. Leucadia will continue to operate in its current form, except that the merger agreement contemplates that Leucadia’s Crimson Wine Group, with a book value of $197 million, will be spun out in a distribution that is intended to be tax-free to current Leucadia shareholders prior to the completion of the merger. Link to comment Share on other sites More sharing options...
WhoIsWarren Posted November 12, 2012 Share Posted November 12, 2012 I guess you could call it 'obvious', but it never is until it happens. My thoughts so far: They've sorted out the succession issue anyway, with Richard Handler coming in as Leucadia CEO. And in Handler / Friedman, you've got two guys with significant Leucadia stock, so their interests are aligned (unlike say Justin Wheeler). The argument for putting a discount on Leucadia for the $1.4bn DTA is also lessening. Jefferies makes c.$450m pre-tax; at 35% that's $160m of tax a year. I'm not a fan of leveraged financials as a rule, mainly it's because of the complexity and the inability of Outside Passive Minority Investors to be able to see what the assets and liabilities are, and what the risks around them are. At least by owning 100% of Jefferies, Leucadia management will know exactly what it holds and should be better able to manage risks and value the business. One disappointment for me is that Leucadia is using its own stock to fully fund the deal. In my opinion Leucadia is very cheap! But I trust the Leucadia guys and besides they need cash for the gasification project.... Hopefully we'll get more info on the call this morning.... Link to comment Share on other sites More sharing options...
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