PullTheTrigger Posted August 13, 2009 Share Posted August 13, 2009 http://finance.yahoo.com/news/The-Steak-n-Shake-Company-and-prnews-1687069780.html?x=0&.v=1 The Letter of Intent contemplates that on or prior to closing Western will distribute to its stockholders all of the SNS shares beneficially owned by Western. Further, under the terms of the Letter of Intent, the consideration payable to Western's stockholders will be based on a net transaction valuation of approximately $22,959,000.00. At closing, each share of Western's common stock would be converted into the right to receive an amount equal to approximately $8.11 in the principal amount of debentures issued by SNS. It is anticipated that the SNS debentures will have a term of five (5) years, will bear interest at the rate of 14 percent per annum and will be pre-payable without penalty at the option of SNS after one (1) year from the date of issuance. Link to comment Share on other sites More sharing options...
Nnejad Posted August 13, 2009 Share Posted August 13, 2009 I'm having trouble understanding this.. anyone care to explain? Edit: Im thinking by net valuation, they mean the price for WEST after ignoring their stake in SNS. In which case, those shares will be distributed pro-rate to WEST shareholders? Link to comment Share on other sites More sharing options...
ExpectedValue Posted August 13, 2009 Share Posted August 13, 2009 Hmm. So from the 10Q, West says they own 1,5553,545 shares of SNS. There are only 2.83M of WEST Shareholders. Does that mean every 2 shares of WEST will give you a SNS share plus 2 of the debentures? Link to comment Share on other sites More sharing options...
Redskin212 Posted August 13, 2009 Share Posted August 13, 2009 Count me in as not fully understanding as well. I think the transaction is two steps: 1) SNS shares held by WEST are distributed to WEST shareholders and 2) the remainder of WEST is valued at $22.9 million and purchased by SNS using the 5 year debenture yielding 14% That puts a value on WEST at $40.3 million broken down as follows: 1) value of SNS shares $17.4 million (1,553,545*$11.20) 2) remeainder of WEST $22.9 million. Does this make sense?? Link to comment Share on other sites More sharing options...
rogermunibond Posted August 13, 2009 Share Posted August 13, 2009 NPV of $23Million earning 14% over 5 years is about $40 plus right? The only problem with that is the prepayable without penalty after 1 year of issuance. Does that mean face amount of $23M or plus all interest payments? If the second then it's a fair deal. Link to comment Share on other sites More sharing options...
oklavalue Posted August 13, 2009 Share Posted August 13, 2009 1 WEST= $8.11 in SNS deb. + .466 shares of SNS Link to comment Share on other sites More sharing options...
SFValue Posted August 13, 2009 Share Posted August 13, 2009 "net transaction valuation of approximately $22,959,000.00. At closing, each share of Western's common stock would be converted into the right to receive an amount equal to approximately $8.11 in the principal amount of debentures issued by SNS." seems to me that you receive 8.11 in debentures (principal) + SNS shares prorata. 8.11 x 2.83 = 22.95 mill total consideration at today's SNS price 11.11 = 1,553,545 x 11.11 = 17,259.9 debentures = 22.95 Total = 40,218,885 / 2.83 = 14.21 per share Link to comment Share on other sites More sharing options...
Junto Posted August 13, 2009 Share Posted August 13, 2009 Hmm. So from the 10Q, West says they own 1,5553,545 shares of SNS. There are only 2.83M of WEST Shareholders. Does that mean every 2 shares of WEST will give you a SNS share plus 2 of the debentures? My fast numbers. could be totally off: 2,831,884 Shares of West 1,553,545 West owned shares of SNS Estimate of Value at Announcement: $11.17 * 1,553,545 = $17,353,097.65 $8.11 * 2,831,884 = $22,966,579.24 Total Value: $40,319,676.89 Value per share of WEST = $14.24 The challenge is the value of SNS. Is it undervalued at $11.17? I think it is and thus have purchased a full new position into WEST this morning at $12.85 which if the merger goes through guarantees me a fixed return on the investment of 8.83% (14% interest on $8.11 for one year) plus the upside potential of SNS. I already own a half position in SNS with a cost average around $6.50. You can do a goal seek to see where the trade falls into negative territory. I think this is a good trade long term. Link to comment Share on other sites More sharing options...
Parsad Posted August 13, 2009 Share Posted August 13, 2009 Perhaps, this is why he delayed on the WEST shareholder's letter, n'est ce pas? I'm sure there will be some more clarity after today's AGM and when the letter comes out. Either way, we now know exactly where his time will be spent going forward. I think it's great news, with a slight but fair premium to WEST shareholders for their loyalty, and long-term SNS is the main holding company vehicle. Excellent! Cheers! Link to comment Share on other sites More sharing options...
link01 Posted August 13, 2009 Share Posted August 13, 2009 Hmm. So from the 10Q, West says they own 1,5553,545 shares of SNS. There are only 2.83M of WEST Shareholders. Does that mean every 2 shares of WEST will give you a SNS share plus 2 of the debentures? remember that west shareholders have a 85% interest in western acquisitions. i believe that western acquisitions holds the sns hsares, not corporate. so you'll need to adjust west's shareholders ownership of the 1, 555, 545 shares to 1,322,213 (85%). is this right? Link to comment Share on other sites More sharing options...
claphands22 Posted August 13, 2009 Share Posted August 13, 2009 remember that west shareholders have a 85% interest in western acquisitions. i believe that western acquisitions holds the sns hsares, not corporate. so you'll need to adjust west's shareholders ownership of the 1, 555, 545 shares to 1,322,213 (85%). is this right? link01, your numbers make more sense to me. last 10Q "As of June 30, 2009 and December 31, 2008, Western Investments, Inc. owned 85.1% of Western Acquisitions, LP. "......."As of June 30, 2009, Western Acquisitions, LP owns a total of 1,553,545 shares of The Steak n Shake Company’s common stock." Yeap so 1,322,213. Link to comment Share on other sites More sharing options...
TorontoRaptorsFan Posted August 13, 2009 Share Posted August 13, 2009 Somehow I am not at all surprised by this annoucement. In fact it makes perfect sense. What we are starting to see here is a new type of Berkshire Hathaway modelled company beginning to form. ;D Link to comment Share on other sites More sharing options...
dowfin1 Posted August 13, 2009 Share Posted August 13, 2009 My concern is that $22+ million of cash is being diverted from the merged entity for distribution to West shareholders, instead of the cash being allocated by Sardar for the collective benefit of shareholders. Link to comment Share on other sites More sharing options...
KFRCanuk Posted August 13, 2009 Share Posted August 13, 2009 It seems that SNS is buying Western Sizzling in the transaction according to the Indianapolis Business Journal http://cms.ibj.com/ASPXPages/6iframes/FrontEndArticlesDetailPage.aspx?ArticleID=43850&NoFrame=1 This was not evident to me since the original press release seems to be directed to WEST share holders. Link to comment Share on other sites More sharing options...
JAllen Posted August 13, 2009 Share Posted August 13, 2009 My concern is that $22+ million of cash is being diverted from the merged entity for distribution to West shareholders, instead of the cash being allocated by Sardar for the collective benefit of shareholders. How is $22M being diverted? SNS is going to pay with debentures. Maybe the $3M per year for interest costs for the debs but not 22M at once. Link to comment Share on other sites More sharing options...
dowfin1 Posted August 13, 2009 Share Posted August 13, 2009 The bonds and interest thereon will have to be paid eventually in cash, and at 14% soon better than later. In other words why not pay West shareholders in SNS stock? Link to comment Share on other sites More sharing options...
QLEAP Posted August 13, 2009 Share Posted August 13, 2009 Sardar knows SNS is undervalued :) junto, thx for the post. makes sense to buy west Link to comment Share on other sites More sharing options...
link01 Posted August 13, 2009 Share Posted August 13, 2009 do we know yet whether or not the debentures will be convertable into sns shares? or does the 14% interest rate pretty much guarantee they wont be? Link to comment Share on other sites More sharing options...
Munger_Disciple Posted August 13, 2009 Share Posted August 13, 2009 Sardar must be confident on earning > 14% pre-tax on the $23M that he will eventually pay WEST shareholders. Link to comment Share on other sites More sharing options...
dowfin1 Posted August 13, 2009 Share Posted August 13, 2009 From what I see, Lion fund owns 934k shares of West at a cost basis in the $8-9 range. After deducting the value of SNS shares spun off, this sale will result in a taxable event for Lion partners/Biglari. So that's why I'm confused as to why it's not structured more tax efficiently. Link to comment Share on other sites More sharing options...
limbacmf Posted August 14, 2009 Share Posted August 14, 2009 Looks like somebody believes the deal is bad for WEST shareholders. Law Offices of Howard G. Smith Announces Investigation on Behalf of Shareholders of Western Sizzlin Corporation http://www.businesswire.com/news/google/20090813006145/en Link to comment Share on other sites More sharing options...
Nnejad Posted August 14, 2009 Share Posted August 14, 2009 Im surprised.. for a board with heavy interest in Steak N Shake, no one is going to look at the accretive value from the transaction? Possible synergies? There's probably 1.5 million saved a year just from de-listing and sharing auditing. By the way, judging by the wording from that lawyer, he seems to (wrongly) think there is no SNS pro-rata share distribution. Link to comment Share on other sites More sharing options...
Parsad Posted August 14, 2009 Share Posted August 14, 2009 There is no one upset. This guy's firm specializes in starting class action lawsuits in "Securities Fraud" or "Takeover cases". Take a look at his "FAQ's on Takeover Cases". http://www.howardsmithlaw.com/Takeover.html His #3 point says that corporate directors own so much stock that they do a transaction that is self-serving and not beneficial to all shareholders. How is that possible in this case, if the WEST shareholders are receiving SNS shares, and Biglari and Cooley are shareholders in both WEST and SNS, as well as through their investments in TLF. It's a rubbish lawsuit! These guys try to bluff the corporation into making a larger offer while convincing other shareholders to join the lawsuit. In the end, it's often cheaper for the corporation to up the bid a bit and settle the suit, while the lawyer takes his cut from the shareholders. The guy's a leech! Cheers! Link to comment Share on other sites More sharing options...
Packer16 Posted August 14, 2009 Share Posted August 14, 2009 Is there anyone from WESTs standpoint that is dissapointed that there is not an all stock option? I invested in WEST to get Sadar's abilities at running a firm not to get a debt instrument. I own enough WEST that trying to sell WEST and buy SNS may cause a pricing issue (due to bid/ask spread and available shares). I have sent an e-mail to WEST requesting consideration of an all stock option. If any of you are in the same boat you may want to let your voices be heard. Thx. Packer Link to comment Share on other sites More sharing options...
rkbabang Posted August 14, 2009 Share Posted August 14, 2009 Is there anyone from WESTs standpoint that is dissapointed that there is not an all stock option? I invested in WEST to get Sadar's abilities at running a firm not to get a debt instrument. I own enough WEST that trying to sell WEST and buy SNS may cause a pricing issue (due to bid/ask spread and available shares). I have sent an e-mail to WEST requesting consideration of an all stock option. If any of you are in the same boat you may want to let your voices be heard. Thx. Packer, I am in the same situation as you. I'd much rather have an all stock option. I will send and email, as well. Thanks, --Eric Link to comment Share on other sites More sharing options...
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