For 9 months.....including non-cash expenses such
as depreciation...what Opco and PZN would look like
Opco had a loss of ($84mm), PZN had net of
169mm...totaled that's $85mm net or appx. $.71/share.
lets pay UNcle sugar out of that too. What 40%? That
leaves a net of $.41 a share or a P/E or 22
Not to make things worst but Opco in the 3rd quarter
had a loss of $32mm or $128MM annualized...that's
means combined PZN/Opco would have earnings of
$41mm...take out $17mm for taxes and that's $24mm for the
combined organization or apprx. $.20/share for a P/E of
45. Ouch. So de-REIT might get them only $24mm of
retained earnings plus the non-cash items. Short term
would be rough it appears to me.
It seems that you are calculating by combining
9-month numbers and annual projections in the same
breath. Subtracting OPCO's 12 mo. losses from PZN's 9 mo.
earnings, etc. Calculating P/E based on 9 mo. figures.
That, or else I got lost in your analysis completely.
9 months...Opco annualized from the 3rd quarter
number of $32mm loss equal loss of $128mm. PZN
annualized would be $225mm for combined of $97mm or $.81
combined ($97mm/119mm)....with a 40% tax bracket woulld
give them net earnings of $.48/shares or 19
Annualizing Opco from the full year so
far...loss$84mm...would give Opco a yearly loss of $112M or combined
income of $113m($225PZN -112Opco) or $.94 non
taxed.....$.56 fully taxed or P/E of 16.
His assumptions include:
- $300 million
from the SI at $10 per share.
- $410 million in
completed projects in 2000, $310 million in 2001.
all fees, chargebacks, etc. eliminated.
rate of 35%.
- no assumption is given on
As Flipper says, he arrives at $0.49 EPS for 2000,
$1.05 for 2001, and EBITDA for 2000 of
Based on this he gets an $8.5 target based on EPS using
a 40% discount to a market P/E of 29, and a $7 to
$10 target based on a 25% discount to similar
companies which sell at 5 to 7 times
Flipper: my number for Q3 of 1998 was after-tax. I took
CCA's net income (obviously after-tax) of $21.1 mm and
added PZN's income of $6.4 million assuming a 40% tax
rate. That gives you $27.5 million total times 4
divided by 118 mm current shares equals $0.93 per share
This raises a disturbing question. If the combined
entities could earn $110 million on an annualized basis
pre-merger with the number of beds it had then, how it could
now earn $77 million (Haley's number for 2000) with
significantly more beds. I realize the company has taken on
debt to pay dividends which lowers the profitability
of the enterprise, but it doesn't seem like they
have been doing that in the magnitude implied by these
This may be very simplistic, but what
ultimately happened with this ghostly transaction the way
see it is that the shareholder got an additional 20%
tacked on to their value by taking money that
have been paid to the IRS and putting it into the
sharehold's hands. Also, the shareholder
also wins because
it take the money out through dividends. Thus,
earning have only been taxed
once to the end
The way the two companies are now
structured may have added a small amount of
expenses, but it really trued up the value of this company.
Assuming these combined companies
added only a minor %
of expenses, then this was trully an ingenious
transaction. Assuming the
strength of the company is as
strong as it was before as an operating entity, then the
return should be about 9-12% making the value of the
stock about $20-25. If the growth rate is
year, then the value of the stock is somewhere in the
range of $35-40 per share.
Also, this created a
great way to smoke screen out a lot of the bad press
CCA was getting as an
operator in the
privatization of a public service.
to YAHOO's divulging of names, I must tell you that
all of the above
information contains many risks
and it is completely speculative of the intents of
and their foresight. Do not use this information to
make an investment decision and base your
solely upon the information that is presented for the
SEC's review and audited by an
accredited CPA firm
with the SEC.
The following is from the WSJ.
Modernization Act would allow a REIT to own as much as 100% of
the stock of a taxable REIT subsidiary that provides
various services to REIT tenants and others. Currently,
REITs can own as much as 10% of the voting stock of a
"The change could resolve
potential conflict-of-interest issues: Since a REIT cannot
own more than 10%, the other 90% often ends up being
owned personally by the REIT's management or other
Does anyone know if this will
apply to PZN. If it does then maybe what is going on is
that OPCO will merge with PZN and PZN will stay a
OK, I give up. Trying to figure out a combined
OPCO/PZN is too frustrating. Chris Haley has me really
depressed. So keep the f***ing REIT. Just pay me (and
everyone else) the rest of the regular and special
dividends before 12/31 and get it over with. Forget the SI.
Pay the divs with debentures off the shelf ($200MM
left). I'll take 'em at 12%, knowing they can't get
diluted no matter what happens down the road (assuming no
BK or foreclosures by senior debt holders). But they
look safer than stock, and more likely than
Does anyone know why they can't do that? NHY? Anyone?
Doesn't it amaze you that the company that made
the big block trade waited until a time period when
millions of potential traders were on the road and getting
ready for Thanksgiving. That was pretty smart on their
part to slip that one under everyones noses without
creating much noise.
I agree completely that what you describe is what
SHOULD happen. Perhaps I'm just too jaded by this world
of resetting options and golden parachutes in which
management is the only interested party that never seems to
Despite the fact that everyone
outside of Baron and Sodexho was given their ownership in
OPCO for free, I can practically guarantee that in a
re-merger scenario everyone will get value, if not par, for