Davidson Kempner Capital opens new positions 3Q 2013 (Part 4 of 6)
Davidson Kempner Capital Management LLC is an event-driven hedge fund manager led by president Thomas Kempner, Jr., who joined the firm in 1984. The firm was originally founded in May 1983 by Marvin H. Davidson as M.H. Davidson & Co. In 1990, current principals Kempner and Scott Davidson renamed the firm Davidson Kempner Capital Management. It has about $21 billion in assets under management.
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The fund started new positions in Whitewave Foods Co. (WWAV), CBS Corp. (CBS), and McDonald’s Corp. (MCD) and it sold Liberty Global PLC (LBTYK), NV Energy Inc. (NVE), and FedEx Corp (FDX).
Why sell Liberty Global PLC (LBTYK)?
Liberty Global reported a net loss of $830 million for 3Q 2013, compared to a net loss of $22 million for 3Q 2012. This was largely a result of increased losses on derivative instruments as well as higher interest and income tax expense. Net losses from derivative instruments increased more than thrice year-on-year, from $237.2 million to $876.3 million, while interest expenses and income tax expenses reached $630.2 million and $228.8 million, respectively.
Liberty Global posted 74% revenue increase to $4.4 billion, which missed analyst estimates. The principal driver of its reported growth was the inclusion of Virgin Media following the June 7 acquisition and, to a lesser extent, organic growth and positive foreign currency movements related to the depreciation of the U.S. dollar against many of its underlying currencies.
In 2Q 2013, the company reported a slowdown in revenue generating units (RGUs) additions. It attributed the decline to changes in pricing and promotional strategies with increasing competition and difficult economic conditions in most markets. It said it continued to face high competition in its Dutch market. Its 3Q 2013, organic RGU additions reflected broadband Internet and telephony additions of 214,000 and 153,000 RGUs, respectively, and a loss of 53,000 video subscribers. Sequentially, its 3Q RGU additions increased 64% compared to its reported 191,000 RGU additions for 2Q 2013. This sequential growth was driven by its European operations, particularly its Central and Eastern European (or CEE), Belgian, and British businesses, as nine out of 12 markets delivered improved performance.
In October, the company agreed to sell its international content division, Chellomedia, for $1.0 billion to AMC Networks Inc. It said the transaction was attractive from both a valuation and liquidity perspective. The deal also simplifies its business and allows the company to focus on its core markets and more strategic programming opportunities.
Liberty Global PLC is an international telecommunications and television company. It formed in 2005 from the merger of the international arm of Liberty Media and UGC, and it’s one of the largest broadband providers outside the United States.
Davidson Kempner Capital provides its services to pooled investment vehicles. The firm invests in distressed debt and stocks of companies that are undergoing corporate restructuring, including mergers, spinoffs, liquidations, and recapitalizations. It also uses event-driven strategies, including merger arbitrage, long/short, and convertible arbitrage. The firm employs a fundamental analysis with a bottom-up approach.
Thomas Kempner, Jr., attended Yale University and the Harvard Business School. After graduating, he joined Goldman Sachs in 1978 as a bond trader. After a few years, he left and joined First City Capital. Kempner specializes in risk arbitrage.
Browse this series on Market Realist:
- Part 1 - Davidson Kempner Capital opens new positions in WWAV, CBS, MCD and sells LBTYK, NVE, FDX—13F Flash A
- Part 2 - Davidson Kempner Capital opens new positions in WWAV, CBS, MCD and sells LBTYK, NVE, FDX—13F Flash B
- Part 3 - Davidson Kempner Capital opens new positions in WWAV, CBS, MCD and sells LBTYK, NVE, FDX—13F Flash C