I bet FDO management teams up with a PE firm and takes FDO private for about $65 per share
FDO insiders already own a decent sized chunk
FDO clearly in play...i expect to hear announcement shortly that they have hired an investment bank to explore alternatives
Well, you saw the beginning of that yesterday, with a nice gain after 7 straight down days. And with a day like today, just staying green would be a feat, yet it's actually up $.25 as I type this. So I think you're seeing just what you'd expect.
Zack, Blake thanks to the both of you to further my education in this part of the financial world. I have, for me, a nice sized position currently in this that I hope will realize a nice sized profit thru all this while getting a continuing education in this topic. Just a quick question or two. I'd think it is safe to say there are many eyes\minds seeing\thinking similiarly. Wouldn't you think the pps will immediately begin an upward bias? Seems to be a no brainer to me.
No, on the contrary I think we are in total agreement. As I said in my last post, it's pretty much out of his hands now - recent events are now controlling him, if you will. An LBO is clearly his best bet, on all fronts (control and otherwise). Doing nothing is not an option, at least in my opinion.
You're actually echoing some of the points I made in my original thread, when the news first came out. I said that I thought Ackman was probably going to give him some time to do something, before he acted any further. I also said it would likely end up being an LBO, but that the first step would be Ackman trying to grab seats on the board.
The one thing I might disagree with (a very minor one, and probably not even relevant in terms of what ultimately happens) is Peltz upping his stake. I'd love to be totally wrong, but his initial bid was so devoid of nailed-down financing, and couple that with his inaction since being rejected, and I'm thinking he might have given up for the time being, and was content to sit and wait. Certainly, Ackman coming in this strong could and should change that, but I'm just not sure. Paulson is another wild card. Remember, he sold his entire position end of last year, then came back in, in the first quarter. Be interesting to see if Ackman's presence pushes him to add or not.
I also said it was gonna be fun to watch, since I always get a kick out of watching how these things play out. It's a side benefit to all of this, one I relish.
I think we see some action very soon.
Question for you...
I think we both agree that there is a wild card with FDO that doesn't exist in other deals...Levine has not only a pretty sizeable stake in the company, he is attached to it in ways that other CEO's are not attached to the companies they run...having said that, it is a public company so he also has a legal obligation/responsibility to do what is best for shareholders
the question is...does he retain more control by doing nothing or doing an LBO? i think this is what we might disagree on
i think Peltz will clearly increase his stake...Ackman probably won't buy much more common stock because he won't want to trip the poison pill...he may use options to increase his stake like he did with TGT...but others could also get involved...there are a lot of "special situations" hedge funds that are probably seeing the potential to make a quick 25-30% on FDO
i think the risk for Levine is that if he does nothing, he runs the risk that Peltz, Ackman, and whoever else might start buying a position get frustrated and start demanding board seats etc...Ackman specifically said he thinks FDO is an LBO candidate but by filing a 13/g, he is giving Levine time and respect to explore an LBO on his own...if Levine fails to act, Ackman and Peltz would likely use other means (proxy fight) to gain board seats and push for a deal themselves
so i think that Levine's control is already dissipating...he has time to make a move (large share buyback, an acquisition, hire a bank to explore the LBO possibility, etc.)...but i think the best way for him to maintain real control is to take it private
i personally think he has less control right this instant than he would if he did an LBO
well they did what a public company has to do, they evaluated the offer
but the Peltz offer was just to attract others (like Ackman)...i don't know the exact figures but i'm pretty sure that FDO management actually owned more than Peltz at the time of his offer
now with 15% of the stock tied up by activists (and i know, Ackman did not file a 13/d, only a 13/g, but still) i think they will explore a management LBO
FDO execs are great...so they don't have to worry about losing their jobs, they will simply continue to run the company as a private one owned by a PE firm...they will probably get a 10-15% stake in the private entitite and in 3-4 years FDO will come public again and they will get a big pay day
Ackman specifically named Blackstone as being interested but I could see 3-4 PE firms taking a look
i'm not saying a deal is announced tomorrow, but FDO at 52.50 is an easy 25-30% gain over the next 3-4 months if it even takes that long
the first step will be FDO management will retain a bank to explore alternatives (i.e. evaluate LBO possibilities)
the poison pill is just to protect them from someone like Peltz or Ackman or an Icahn...it has no bearing on their willingness to do a friendly deal with a PE partner