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Just chill out a minute, the article is a string of ifs and maybes and conjecture.
--They don't like the clubby FB-FBR relationship. Too bad, the merger just formalizes it anyway.
--They admit that current FBR holders are getting a more stable deal:"It's clear that Friedman Billings gets something out of rolling itself into the real-estate investment trust. It maintains that the REIT structure will add steadiness to its otherwise unpredictable stream of earnings and give it access to more capital with which it can better compete with top-tier brokerage firms for underwriting business. In addition, it expects the bigger market value that will result from combining the two companies, and the tax advantages associated with REITs, to boost its shareholder base and add to liquidity in its shares. It expects to save $25 million-$30 million by moving excess capital to the REIT side of the business."
--They highlight Bill Miller's 1.1 million share buy on December 6. He is only the best value manager in the business the last decade.
--They think the merger stretches the REIT laws. Big deal, all the authorities signed off on it.
--Their insightful view on future prospects:"It could be tough to improve on that performance in these difficult times." Gee, that tells us a lot about how they see future cash flows shaping up.
--More ifs and maybes:"Also, if double taxation of dividends is eliminated, REITs may not be as attractive to investors." Like Washington will get anything done on this for months and months and months....
--"There are concerns, too, about the quality of the brokerage firm's own investment portfolio, which consists of a motley group of companies it brought public, including a big chunk of AmeriCredit." Well, maybe that's why FBR wanted to merge into FB's mortgage pool business. Duh.
--"A lot depends, too, on interest rates staying in the current sweet spot." Name any big names who expect rates to go up this year (or even next by much).
Barrons desperately wants to think they are important enough to pump or trash stocks, and they aren't. They become more and more irrelevant as the bear market wears on.
This will be a one-day dip at best.
Since I chose to buy FBR as my entree into the merger, I can't make the case for what FB gets. Perhaps an expert like Bond_daddy can chime in.
I believe the combined entity will continue to be a fat cash cow that I am happy to hold.
I suspect that the two entities were functioning almost like one anyway, given the overlapping senior executives:
"For FBR Asset, this transaction provides the ability to grow earnings, and increase the stability and predictability of earnings in different environments, while maintaining our dividend at $1.37, the pre merger equivalent of $5.00," said Eric Billings, Vice Chairman and Co-CEO of Friedman, Billings, Ramsey Group, Inc. and Chairman, FBR Asset Investment Corporation. "We will accomplish this while at the same time significantly reducing our overall leverage and internalizing our management, thereby increasing substantially the intrinsic value of our company."
Maybe they can save a few bucks not having to print two corporate letterheads all the time.
>>>Barrons desperately wants to think they are important enough to pump or trash stocks, and they aren't. They become more and more irrelevant as the bear market wears on.<<<
In hindsight, Barron's was as much of a joke during the big bull run as it is today...