You make a good point. Although CODI has had years to grow AC and it has performed well even during the depths of the downturn, there is a lot to be said for selling into what might be the peak as it applies to Liberty. Although I think CODI has quite a ways to go with Liberty growth initiatives, the political timing might be as good as it will get in terms of monetizing Liberty.
John: As someone else commented, so far not fully recognized by the market. I have always felt that Fox was the crown jewel at CODI and from a monetization standpoint, it is starting to look like it. Makes me wonder if AC is next on the monetization side as it has been performing almost as well as Fox.
John: It's always good to see that someone on these boards actually has a modicum of understanding about the underlying stock. Check the recent SEC filing re entry into material agreement. I believe it eliminates the supplemental put.
I agree as to moving on from AFM and Anodyne (although I think Anodyne has been rebranded and I don't recall the new name). They have been dragging down earnings long enough. I'm guessing mgmt is quietly working on those sales, considering that they sold Halo which actually generated positive, albeit lackluster returns.
And I agree that CA is a ridiculous state in which to do business but my guess is the thinking is "If it ain't broke, don't fix it." Fox, with the factory and Watsonville and the new corporate headquarters in Scott's Valley, is predominantly a CA business, but Watsonville offers a large pool of moderately priced workers from Watsonville, Salinas and surrounding areas, and relatively low rent. I'm guessing the cost to move the operation to a business friendly state would cost much more than the differential of doing business in CA's anti-business environment.(One could wonder why Fox located its new corporate HQ in a neighborhood as pricey as Scott's Valley, but ....) ACC factories are in AZ and CO (with the recent dramatic expansion of the CO factory). As you note, Liberty is in a relatively low cost business-friendly state with abundant labor resources and no meaningful organized labor.Ergo, originally based in HI, only has a handful of employees with manufacturing almost exclusively in Asia. I'm not sure how much of Camelbak's manufacturing is done in CA, notwithstanding the HQ being in the Chicken Capitol of the World (does Petaluma's Chamber of Commerce still use that slogan?) And I frankly don't know that much about Arnold Magnetics. If I had my druthers, I would spin off everything except Fox and ACC, but we know that isn't going to happen. Although Camelbak and Ergo may work out well because they both have pricing power in their market, I still think that their acquisitions (and that of Arnold Magnetics), were at the top of the their respective market prices with way too much money paid for goodwill.
For those who periodically ask about UBTI, etc., from the 2012 K1 (full year ownership):
Line 1, -0- (if a specific line is not listed, the quantity is -0-)
Line 5, .90/share
Line 6a, 1.12/share
Line 6b, 1.12/share
Line 9a, .85/share
Line 13H, .55/share
Line 13K, .50/share
Line 19A, 1.44/share
Line 20V, .65/share
Jack: As you know, NAV is shareholder equity/shares outstanding. The calculation for the post-secondary NAV is:
Equity from 10k; $878m
Plus new equity from secondary (net; as reported in 10k) $147m
Equals total equity (after secondary) of: $1,025m.
Divided by total shares (after secondary; 38.7m plus 6.3m equals 45m):
$1,025m total equity after secondary divided by 45m shares after secondary equals $22.7777777 NAV.
As to the $18m blue sky we paid for, in fairness to mgmt, SLRC was recently trading at $25/share and but for the Rug Doctor issues that have recently surfaced, might well still be over $25/share. This was a premium over book value of about 10%. Shareholder equity in Crystal is the value of the portfolio ($400m) less Crystal liabilities ($143m), or $257m, for which we paid $275m, a premium of about $18m or only about 7% over book value. So mgmt apparently paid a 7% premium for Crystal.
And if you really want to be cynical, paying a premium to close a deal before 12/31 (which you report IR told you), when the deal will not generate any shareholder revenue (aka "economic benefit") in the 12/31 quarter, but will generate a hefty mgmt fee based on $275m of new "total assets" as of 12/31, well ...
Just a couple of comments:
Gross benefits by increasing the total assets upon which the management fee is calculated (now $275m greater with Crystal), plus the increase via the 1/13 secondary.
In response to another question: I see no reason for the Crystal acquistion to do anything for NAV. SLRC bought certain assets (for an apparent premium over book value, which would have resulted in a decline in book value had Crystal been merged into SLRC instead of being treated as an independent subsidiary). The only way for this to change NAV in a postive way is if it was a merger and the assets were purchased below book value, instead of a premium, or if the assets appreciated.
As to a separate question about the impact of the January secondary at above NAV pricing, and its impact on NAV, my calculations (which are always subject to mistakes), show that NAV increased from the 12/31/12 NAV of $22.70 to a new NAV (after secondary) of $22.77.
Although I agree with Jan that dividends from Crystal do not come without a cost, it remains to be seen what those costs will be to SLRC shareholders. As everyone heard/read in the CC, mgmt said +/- 11% dividend from Crystal to SLRC. Mgmt did not say whether that was 11% of $275m or 11% of $400m, but apparently IR has said it is 11% of $275m (which makes sense and I don't dispute what Jackmaster has been told, only that I prefer to hear it myself from the original source and IR has thus far refused to answer that question for me). [Although, with Crystal earnings of $400m at 12% yield ($48m) and a dividend of only 11% of $275m ($30.25m) that leaves about $18m for Crystal interest and overhead, of which about $8m is interest ($135m at an estimated 6%), leaving $10m for Crystal overhead.]
The unanswered question is, how much additional overhead are we paying as those dividends are passed through SLRC (plus the 2% gross asset fee)? It would be shameful if SLRC shareholders had to pay two layers of overhead on the Crystal assets.
So, we are acquiring about $255m equity (23 loans worth $400m less $145m CF at closing, per PR), for $275m? I hope we are also acquiring some other meaningful assets.