Hope some of the oldtimers occasionally are lurking.
What's Happening: Corvex Management and Marcato Capital Management formed a group to encourage Corrections Corp. to convert to a real-estate investment trust.
Key Numbers: $75 to $100 million: potential estimated annual tax savings to the company by converting to a REIT 13 to 17: the multiple to adjusted funds from operations that REITs typically trade at $45 to $55: the estimated stock price of CXW in a REIT structure
Behind the Scenes: Corvex was founded by Keith Meister, a former lieutenant of Carl Icahn. Marcato was founded by Mick McGuire, a former lieutenant of Bill Ackman.
Corrections Corp. was a portfolio company of Pershing Square when McGuire worked there. What is different now is that legal and business developments have made converting to a REIT easier than in the past. Corvex and Marcato believe this can be done "without material disruption or changes to the issuer's current operations," which likely means without separating Corrections Corp. into two companies.
Both Marcato and Corvex are deep-research and analysis investors, and if they think it can be done, it likely can be. Now, they'll try to convince management. Their style would be to work with management to implement structural changes, while leaving operations to management. But if management ignores or resists their overtures without good reason, Meister and McGuire have experience in all forms of shareholders activism, including proxy fights.
-- Kenneth Squire
Memo to Messrs. Meister & McGuire: call me. Memo to Doc, Jr: call them.