Theres another possibility for OB. A poster here threw out that WTM could maybe buyback the 21% OB they don't own, around $17 and take OB private OB book around $12. A $17 offer is about 1.4x book. I guess reasonable. But I throw out the flip side to that.......that WTM could be a seller, not a buyer. If they ever wished to do that, now is the time. Becauyse the TAX on divindends and Capital GAins are now the lowest ever, and I doubt will stay that way for long. It is rare to have divdends taxed at 15%, and LT capital Gains at 15%. With a $15 trillion Federal debt load, Div and CAp gains taxes have no where to go but up - some time. if WTM coudl get 1.4x to 1.5x book for their stake of OB, that would be gross to them of $1.3 to $1.4 BILLION. What WTM has slowly been doing is taking WTM closer to private by the very large buybacks. The last one was 1 million shares in a swoop. If I was WTM I woudl consider selling OB and take the $1.4 billion, after you suck out another dividend or two. Then pay the LOW 15% tax. But BEFORE you do all that you buy BACk another 1 millioin shares. And THEN you sell OB.....WTM couild easily rise 100 points on that. Maybe a lot more. WTM is tax smart and efficient. And mgmt owns a lot of stock. I'm watching how heavily they contginue to retire WTM shares this year. Odds are that if they do a deal with OB, they will be large buyers beforehand, but not too close.
It is to cheap relative to BV for open market sales. They would have to sell privately to a stratgic. WTM is awash in excess capital and does not the money. They make the dividend whatever they wish. The average yield on OB has been over 9% counting the extras. The corporate tax rate on dividends will remain the same as there is dividend preference for corporations.
On February 2 OB was selling for $16.45. I posted around then I thought OB was expensive and WTM was a better buy. I couldn't figutre why OB was $16.45.....I thought it looked like a deal was coming for OB.
So in the just over 100 days since Feb 1, and $16.45.......OB is now just above $13.00. I think it's a good point to buy some. The 21 cent dividend comes in a few weeks....so that would put OB down to the high $12.80's. I think you get a lot of buyers at that price. At that price you push almost a 7% dividend!! Compare that to the Treasury that sold 2 years bonds today at 0.30%. OB looks okay. NOT at $16.45, but at $13.
Also, just before the dividend, WTM is having it's annual investor conference and OB is also speaking. Things aren't that bad at OB to justify it dropping from $16.45 to $13.08 in 100 days or so.
WTM also has other options. It has a warrant to buy SYA that it will likely exercise. SYA is selling at .67 x fully diluted BV. It sells annuities so that biz is dragging with low rates. It is clearly worth BV. OB is also generating excess cash. I expect a special dividend near end to drain capital from the company as it has done in the past. OB is clearly a good buy at this level.