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Brookdale Senior Living Inc. Message Board

  • boreasgm boreasgm Mar 20, 2008 8:29 AM Flag

    BKD: Shareholders Get Slapped

    bkd manangement decision to cut the dividend 50% and buy back the common stock is a slap in the face to shareholders. i am of the opinion that it was done at the request of fortress investment group (fig) which owns 60% of bkd's common stock. since fig is hurting for cash and on brink of folding, fig will pressure bkd to buy their stock at a premium rather than buying it on the open market as should be done.

    just another day in which a company's management has slapped down its shareholder's.

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    • i hope you are correct. however, financial history reveals that it is not wise to hold stock in a company that is majority owned by another company.

      • 1 Reply to boreasgm
      • may be true...but there are notable exceptions. any generalization isn't that meaningful--have to take on a case-by-case basis. Genentech is 55% owned by Roche. if you bought at it's down times in 2002, would have made a ton. CHIR was 43% (not majority, but huge minority) owned by Novartis--taken out. i hear you though--fortress hasn't exactly added a lot of value lately.

        i can't believe BKD is down--i think Lehman has a lot more clout (and clients) than the other guys.

    • Once again (many similar posts), i believe you have it backwards. They are buying back shares and using some cash generated from a lowered dividend, because that's the cheapest cost of capital to them (2-3% if they only get Libor). They are not "cutting the dividend" and then buying back shares to cover for that.

      It's not just Fortress--any large smart investor would want them to do this. 6% of shares will be retired, at a cost of 3.5%-5% of cash it is immediately accretive. It also removes the weakest shareholders, because only those would be willing to sell in the mid-low $20s. Since Fortress owns 60% and other large holders 10%-15%, they can squeeze out the weaker guys and have a longer-term thinking, supportive shareholder base.

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