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Boykin Lodging Company (BOY) Message Board

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  • The deal requires BOY to terminate the hotel management agreement with Boykin's private company, according to the 8-K. I don't see the termination agreement in the 8-K so I don't know the terms of the agreement. Per the 10-K, BOY can terminate 18 of the hotel management contracts on 90 days notice with no payment. Terminating the 19th hotel management contract requires a payment equal to 2 times the 2005 management fee. I don't know how much the management fee is for that hotel.

    BOY itself only has 18 employees, so I assume the hotel employees are employed by the private company. If the management agreement is being terminated, the buyer will presumably have to hire those people. I don't see anything about this in the agreement, or if Boykin (private company) is getting anything on the side.

    In any case, if Boykin is giving up his contract, maybe this is a done deal.

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    • I know it's rude to reply to my own message, but I'm doing this in pieces so that Yahoo doesn't cut me off.

      At March 31, BOY had net equity of $ 252.5 million, or about $ 14.20 per share (soft number because I don't know if the restricted shares are in the share count). The deal assumes that Marco Island will be sold for about a $ 30 million gain, and that Boykin will buy Pink Shell and Banana Bay for what looks like a gain of $ 6 million to BOY. So book value should increase by around $ 2 per share. Then, there are several assets the buyer is getting that aren't in book value. If I read the 10-K correctly, BOY is suing its insurer for $ 22 million in damages due to a 2004 hurricane. It looks like nothing has been recorded for this part of the insurance coverage yet, due to uncertainty of recovery, but I'm sure BOY thinks it's worth something or else the company wouldn't have filed suit. Finally, BOY's subsidiaries have an NOL carryover with a tax value of almost $ 15 million. No asset has been recorded for this value yet. The buyer will get this NOL; it is certainly not worth anything near the full value, but it's presumably worth something. So the real book value is probably somewhere around $ 16.50 - $ 17.00.

      Then this number must be adjusted for the value of the properties. If I assume the discount is $ 5 or $ 6 per share (comparing the $11 sales price to the adjusted book value), this implies that the hotel properties being carried on the books for $ 360 million were only worth $ 250 million. Sort of a big discount that should have been recognized in prior financial statements.

 

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