The nice thing is this is really a perfect environment for Bluegreen right now. Economy growing slow but steady and rates stay low so no margin compression.
micro - My point is if they did a stock for stock exchange it would not be at $21. It could be at the same 5.39 ratio it was before.
If BFCF buys the rest of BBX and lowballs it will cause a lot of problems. They did a tender for $20, so obviously they think it's worth quite a bit more than that. Of course as a BFCF shareholder we'd rather them pay as little as possible, but I'm not sure why they'd want the overhang of another lawsuit for years which will cost them millions in legal fees and then leave it up to a judge to decide what the value of BBX is really worth in which case they can end up getting socked. The judge can say it was worth $35 (plus interest) and that would end up costing them a boatload.
If BFCF does a stock for stock merger they can offer the same 5.39 ratio and I can almost guarantee the majority of BBX shareholders will be happy with that. It would be virtually impossible for BBX shareholders to make a case that they were getting ripped off because you are no longer relying on the value of one company, you have to take into consideration the value of both BFCF and BBX. It's easy to make the case that if BBX is undervalued then so is BFCF and vice versa and that the merger benefits both parties by simplifying the structure. BFCF owns 81% of BBX plus the rest of Bluegreen so it's pretty easy to compare the two. Yes there will be some share dilution. I think maybe around 15% or so, but they would also be getting the additional 20% of BBX which includes the rest of Bluegreen and a bunch of quality real estate, so I don't think this will drag down earnings. The end result would be a company that would attract a lot more interest from investors compared structure they have now.
The news came out after 8150 closed I believe. It just seems they don't know how to be conservative in their guidance. They did the same thing last year. On the last CC one of the analysts specifically asked them about their guidance and that they would need to be at over $160M for 3Q and 4Q but they said they were still confident based on customer demand. Now they say $150M. They don't even give a range which is very odd.
It's quite a conundrum. There is still a wide disparity between 8150 and IMOS. There is still the promise of this big China expansion next year. Plus I still think the Tsinghua deal has a good chance of happening. I wish I knew how long it will take for TW to make a decision on the Tsinghua deal.
micro - I own both, but a good amount more of BFC. I would be fine with the stock merger for a number of reasons. BFC already owns 81% of BBX, so issuing shares for the additional 19% would not be very much. If BFC tries to do a forced buyout they will easily have to offer in excess of $20. So right there they would have to offer a sizeable premium to the current trading price and they could still be subject to an appraisal rights lawsuit if they don't offer enough. If they do a stock for stock merger then they really don't have to offer a premium at all since you have two underpriced companies combining. In fact the companies are trading very closely to the previous merger ration before they cancelled it. The companies are even more similar now that BFC owns 81% of BBX. Yes BFC is more weighted towards Bluegreen than BBX, but the point is a lawsuit would be much less likely if not impossible (I'd need to try to research the law on that ) and it would be much harder for BBX shareholders to prove that they are getting ripped off. As a BBX shareholder I would be more than happy to combine based on the previous merger terms and I believe almost all other BBX shareholders would be fine with it too. So in reality the stock for stock merger would probably be better for both shareholders in the end.
Part of the condition of the stock merger has always been an uplisting to a major exchange (which would be either NYSE or Nasdaq). That's why there will be no merger until the uplisting is complete.
No. The $20 purchase last year was a tender offer and was completely voluntary so you have no right to sue. A forced buyout is completely different and shareholders have a right of appraisal if they vote against the buyout. Considering BBX's current stated book value is $20.50 one would expect a significant premium to that price to begin with and one could make an extremely good argument that the stated book value itself is significantly understated.
I don't think anything would stop them from a squeeze-out except that they would probably be sued just like they have in the past. I know I would not be happy with $20-$21 for my BBX shares and would vote against the buyout opting for an appraisal. I think it would be pretty easy to prove the shares are worth much more (especially using comps for DRII). It doesn't matter how much of a premium they give if they are underpaying. So then they'll have to go through yet another lawsuit, legal fees, etc.
That's why I believe a stock merger is much more likely and would be would be harder to battle in court. For that BFCF will need to get uplisted though which won't happen until the appeal is complete.
Always possible, but the price didn't drop right down and there still seems to be some buying going on with decent volume. Of course the person can be pretty patient since there doesn't seem to be a lot of competition on the buy side.
In the case of DRII they announced a strategic alternative process back in February and actively sought bidders. I'm certainly not counting on it, but it just shows that both BFCF and BBX are massively undervalued. I would say based on what DRII was purchased for you can easily put a conservative price tag of $700M on Bluegreen. I'm not sure about disclosure rules, but since Levan and Abdo have a controlling stake in the BFCF a company probably wouldn't make an offer unless they said they were interesting in selling.
I did send an email for what it's worth telling them it makes no sense not to pursure a sale of Bluegreen (and buy back shares).
The dividend is so small it is laughable. They claim some people/funds/whatever said they'd like to invest in BFCF, but couldn't because there was no dividend. Personally I have a hard time believing that. I mean if they came out with a 3-4% dividend I could see a bunch of yield starved investors start to salivate, but a sub 1% dividend isn't going to fool anyone. It certainly did diddly for the stock price when they announced it. Unfortunately distributing $2M isn't going to stop them from buying a company if they want to.
Certainly one case has nothing to do with the other (and yes IR always likes to mention the last case like it's a precedent). The appellate court's line of questioning is definitely interesting though and I don't have a transcript of the whole proceeding so I have no clue what else was discussed. No offense to your lawyer friend, but I would take his opinion with a grain of salt unless he knows this appeals court personally and had experience with SEC related cases. There are a whole bunch of possible outcomes and it's almost impossible to guess what they'll decide.
I don't know what will happen, but the shareholder lawsuit against BBX that went to the appeals court was overturned and did not go back to trial. The court can determine that the SEC didn't have suitable evidence in the first place and throw the case out. We shall find out. No clue when.
Interesting article regarding the appeals court oral arguments on law360. Here is an excerpt:
" (SEC Counsel) Rosen also faced scrutiny from the appeals panel on the SEC's evidence and its pursuit of summary judgment on Levan's statements before the matter went before the jury.
In a lengthy back-and-forth, U.S. Circuit Judge Julie Carnes pressed Rosen on what “cold evidence” there was about the actual performance of BankAtlantic's loans, beyond opinions stated by Levan and other bank officials in emails that the SEC attorney initially mentioned.
“Isn't the fact that we're having this long colliquy evidence that a jury should've decided this?” the judge asked.
Judge Carnes also asked if seeking partial summary judgment on findings of fact usually reserved for juries is a practice of the SEC.
Rosen said she did not know but that it was not inappropriate and helped to narrow the issues for trial, to which Judge Carnes responded that it also expands the issues for potential appeal.
U.S. Circuit Judge Charles R. Wilson also questioned if the SEC could cite other cases that had followed a similar path where the trial judge informed the jury the defendant was a liar and asked the jury to focus on other issues such as scienter.
Rosen said the commission had not found another example.
U.S. Circuit Judges Charles R. Wilson and Julie Carnes and U.S. District Judge Lisa Godbey Wood sat for the Eleventh Circuit.
The SEC is represented by in-house counsel Anne K. Small, Sanket J. Bulsara, Michael A. Conley, Benjamin L. Schiffrin and Emily T.P. Rosen.
Levan and BankAtlantic are represented by Eugene E. Stearns, Grace Lee Mead, Cecilia D. Simmons, Matthew C. Dates and Jenea M. Reed of Stearns Weaver Miller Weissler Alhadeff & Stiterson PA.
The appeal is SEC v. BankAtlantic Bancorp Inc. et al., case number 15-14629, in the U.S. Court of Appeals for the Eleventh Circuit."
I can certainly understand the frustration. I've been involved with BFCF and BBX now for a couple of years. The only reason I'm probably more patient is I've managed to trade in and out with some decent success and was able to buy BBX at some good cheap prices before I tendered all my shares.
This lawsuit has taken longer than I ever could have expected and I was hoping they wouldn't actually appeal what I consider a relatively minimal penalty. By the time the appeal is done Levan will probably be at least halfway through his ban. They seem optimistic that they will win the appeal and always refer to the previous shareholder lawsuit they had overturned in appeals court. I'm no lawyer, but from what I've read I don't think it's the same situation and I'm rather pessimistic that the ruling will get overturned.
They had the ability to buyback shares for years and never did so until recently, but the amount was way too small. They should initiate an open ended buyback for $50M right now and start buying some shares. They can do it slowly, but just having a buyback in place would give some people incentive to buy.
As jsb1949 indicates it's obvious there was someone selling a sizeable chunk of shares over the past several weeks. Whether they are done or not I'm not sure. For all I know someone owned 4.9% of the company in which case they didn't have to file when they sold.
Other than that there are just a lot of factors:
- Still an overhang due to the appeal. Failure to merge BFCF/BBX still leads to a complicated structure.
- Lack of any exciting news.
- Management doesn't hold conf calls and really doesn't give a whole lot of detail in their earnings releases. I think a lot of people don't trust management and believe they don't manage the company for the shareholders (can't say I completely blame them). Their majority voting stake rules out any activists.
- No analyst coverage.
- Earnings tend to be lumpy due to RE transactions and BBX Sweets puts a dent in earnings until they finish spending on integrating the companies and turn profitable.
- Failure to do any significant buybacks which I emphasized on my call. A sub 1% dividend is not going to interest anyone in my opinion. It's also a bad choice of capital allocation. Buying shares at a significant discount to book value and NAV is a no brainer.
Some of these things may never change, but others will eventually get done sooner or laer (appeal, merger, analyst coverage at some point, buybacks).
Really management has to do one of two things. Get people to really believe in the company and give them a reason to buy OR keep buying back stock until there is no one left willing to sell at these ridiculous prices.
gca - This is my third time trying to post this over the last few days... I kept getting sidetracked and shutdown my computer twice in the middle of typing! :-O
Anyway. In regards to the financial crisis I looked back at Bluegreen's securitizations during those years and I don't see anything about them breaching any covenants and they certainly didn't default on any of the securitizations. Defaults certainly went up which impacts cashflow, but this was nothing like the disaster in the residential MBS market which practically imploded. I did speak with IR a few days ago and he did mention how during the financial crisis they still had more demand for VOI's and wanted to do more sales, but the debt market was in such bad shape they were only able to get a securitization for about half the amount as normal, so they basically had to lay off a bunch of sales staff until things improved.
As far as the net cash I will take that back as it is not technically correct. What I will say is BFC has a large amount of financial flexibility as well as a lot of hard assets (real estate, VOI inventory, loans backed by real estate) which, while they aren't liquid, under any environment I've seen in my lifetime can only go down so much (as opposed to a company with assets like manufacturing equipment or retail inventory which if it becomes obsolete or out of favor could be worth pennies on the dollar). I would separate their debt (aside from the securitizations) into two main buckets. There are the items on the note and mortgage notes line in the balance sheet which are shorter term. Then their are the Junior Sub Debentures which are Trust Preferred Securities that they issue which don't mature for another 20 years.
I'll never say 'nothing can happen' since I haven't experienced 'everything' yet, but this gives them a lot of protection and would make it very difficult for the debt to drag them under. That's enough for now. Hope that helps express my thoughts.
Yes David P. emailed me as well. I told him, as I've mentioned before, that it would be nice if they issued releases in the US for IMOS holders so we have the same information as 8150 holders and avoid confusion from people (like me) who try to interpret things by reading Taiwan news.