I wrote again to I.R. to get an explanation of why paying 11% interest to finance the insurance company acquisition was a good deal for minority shareholders. I don't know if the other two people on this m.b. picked up on this but apparently they actually declined to go ahead with the insurance company acquisition at least for now. I missed this but just followed up requesting an explanation of what they plan to do with the money and why it's good for minority shareholders. I'll post any substantial replies.
Hmm, that's strange, considering the amount raised was exactly equal to the proposed purchase price of the insurance company. I can't imagine what else they could do with the proceeds that would return substantially more than 11%, because if they were just going to buy back stock (which I still contend is at least 40% undervalued) why wouldn't they just use the $140 million in cash they already have on hand. Anyway, here's what the latest quarterly filing said their strategy would be: "We plan to become a holding company focused on obtaining controlling equity stakes in subsidiaries that operate across a diversified set of industries. We view the Spectrum Brands Acquisition as a first step in the process. We have identified the following six sectors in which we intend to pursue investment opportunities: consumer products, insurance and financial products, telecom, agriculture, power generation and water and natural resources."
<<<Our corporate structure provides significant advantages compared to the traditional hedge fund structure for long-term holdings as our sources of capital are longer term in nature and thus will more closely match our principal investment strategy. In addition, our corporate structure provides additional options for funding acquisitions, including the ability to use our common stock as a form of consideration.>>> -------------------------------------------------------------
This is what I mentioned in the other thread that I though was the case. Hopefully it will turn out that there is more to the 11% bond than meets the eye right now.
I've received the same reply to my email two more times today so I'm not sure if Jeff from I.R. got my follow up. I sent another just in case. I did read the information in the 10Q and it sounds good but as you point out how are they going to earn more than 11%? I guess if they have some sort of distressed asset that they can get cheap enough it might make sense. It would help if they could throw us minority shareholders a bone and give us some inkling that there is a rationale to the 11% bond that doesn't involve minority shareholders holding a bag.