And then we have this news report this morning.
CF Industries Bids $47.40 a Share for Terra Industries, Tries to Top Norway's Yara (story to follow)
The bottom line; companies are making deals now at an accelerated pace. Are you learning something here Warren.
Understand your position, especially if you have been on this train for so long...
I only got involved in this one following the carnage last spring. Hence, I don't have the legacy ill-will that many long-term shareholders have. I only got involved here because the company was trading at a huge discount to net cash. After doing research on WK and in having a good understanding of deal flow and capital markets, I got involved.
My educated bet is that something will happen in the next year or so, and I am willing to wait as I view Clarus as a good place to tuck cash with great upside in this environment. When compared to other investments, I am very comfortable here and am comfortable with WK for a variety of reasons.
If you bought this stock because you see deals happening you are in it for the wrong reason. Assuming Warren is rational and trying to maximize his own wealth (which I believe he is since he bought as much stock in 2008 and possible without tripping NOI carry forward change of control requirements) he needs to act soon. Its not about the 2020 expiration but, given the amount of cash on hand, he needs to buy a $25 million EBITDA company ASAP and see HEALTHY growth in earnings to come close to realizing the full 227 million NOI. He is definitely playing for more this year than the 7 mil that will expire in 2010.
You stated, " If you bought this stock because you see deals happening you are in it for the wrong reason. "
That comment does not make much sense. Clarus by itself as it is now has no value, period. It makes no products, provides no service, etc, which is the very reason the Nasdaq has delisted Clarus. All it has is a boatload of cash that earns about 0.25% APY, which is not very impressive.
No, the most logical reason for anyone to invest in Clarus is to see Warren Kanders actually do what he has been writing about in the quarterly reports since 2002, that he wants to deploy the cash assets into a profitable ( and one that pays income taxes ) where he could use the benefits of the NOL's.
Thus, the only good reason for investing in Clarus now is to participate in Kanders making a deal. Without a deal there is no value and no reason to invest in Clarus.
Good point, and while M&A activity has been sparse, the "price" is not going to get any cheaper but rather start
rebounding. On the other hand, the value of the NOL's is what it is. My impression is that he wants to take over someone else and stay in charge, rather than be bought out. That does not make much sense to me as a general investor, but I don't think he is necessarily looking to share our fate:) IMHO.
Strategic buyer M&A is not the same as financial buyer M&A.
Multiples for financial buyers like Clarus are now at around 2004-2005 levels, around 7xEV/EBITDA.
Equity contribution is 45-50%.
So, Clarus could do about a $140mm deal using its cash + debt. They could buy about $20m EBITDA in tax-free cash flow (using the NOLS).
At today's market cap, you are essentially paying 3.5x EBITDA for that $20m EBITDA in acquired cash flow.
Warren will find a deal/s. Just be patient. The environment is better than last year for deal-making.
Much of what you stated makes sense ... however, Warren has been trying to find the strategic deal for well over six years.
FWIW, it was almost seven years ago that he launched is proxy contest against the former management and I was heavily involved in getting a lot of shareholders through this MB to vote for Kanders. It was not an easy win for Kanders as he won by just a few percentage points.
Now, however, it is clear that more and more companies are executing M&A deals and my point was ... why not Kanders and Clarus.
Does the patience you refer to mean that we will have to wait another seven years ?
I agree, the environment for deals certainly looks better this year as compared to last as is easily confirmed by the basic M&A deals this year vs. last.