Workouts

jamesmith

Starting a discussion thread for workouts, the term used by Buffett in his partnership letter for Merger, Acquisition and Spin-off plays.

Here's a section from Buffett's 1964 partnership letter about workout:

“Workouts” - These are the securities with a timetable. They arise from corporate activity - sell-outs, mergers, reorganizations, spin-offs, etc. In this category we are not talking about rumors or "inside information" pertaining to such developments, but to publicly announced activities of this sort. We wait until we can read it in the paper. The risk pertains not primarily to general market behavior (although that is sometimes tied in to a degree), but instead to something upsetting the applecart so that the expected development does not materialize. Such killjoys could include anti-trust or other negative government action, stockholder disapproval, withholding of tax rulings, etc. The gross profits in many workouts appear quite small. A friend refers to this as getting the last nickel after the other fellow has made the first ninety-five cents. However, the predictability coupled with a short holding period produces quite decent annual rates of return. This category produces more steady absolute profits from year to year than generals do. In years of market decline, it piles up a big edge for us; during bull markets, it is a drag on performance. On a long term basis, I expect it to achieve the same sort of margin over the Dow attained by generals.

jamesmith

No position in M&A workout yet, started a position with BAM.
YONG looks fishy with 20% difference. The other deals looks probable from a very very brief look, need to look into them more before taking position.

jamesmith

BAM spin-off BPY completed, saw shares of BPY in my account today.  $22.05 per share. Planning to keep both BAM and BPY for now.

jamesmith

jamesmith 发表于 2013-3-5 12:08 PM
No position in M&A workout yet, started a position with BAM.
YONG looks fishy with 20% differe ...

I didn't get any of the four...but here are their price now:
AM $18.24
YONG $5.32
HOGS $12.86
KCG $3.48


Looking at News Corp spinoff. The New News Corp will start with $2.6 billions of cash and no debt. Rupert Murdoch will have control on both company.

Parent Name:
News Corp (TBKA: 21st Century Fox)       
Current ticker: NWSA       

Spinoff:
New News Corp (Publishing Unit)
Spinoff ticker:
not sure yet...

jamesmith

jamesmith 发表于 2013-4-22 01:25 PM
I didn't get any of the four...but here are their price now:
AM $18.24
YONG $5.32

KCG's lower price is making it more interesting now.

With closing price of $3.51. Merger price of $3.75 is 6.84% upside. Merger is planned to be done in July, not a bad return for few months.

However there's a catch...
KCG and GETCO filed an amendment for their merger:
http://www.marketwatch.com/story ... greement-2013-04-15

Shareholders can choose one of the following:
1) receive $3.75 per share
2) for each old KCG share, receive 1/3 share of the new company after merger...

Only 66% of current KCG shares can be done through the cash option. That means if more than 66% pick cash, you might not get all of your shares converted to cash.

Under the revised exchange ratio, the planned new entity's shares are expected to carry a book value of $12.47 each. GETCO is still paying the same amount for KCG, they said they made this revision to make sure the new entity's share price trade above $4, the requirement for listing on NYSE.

Currently KCG is trading at 0.54 P/B, which give it a book value is $6.5 per share. This is interesting, just by looking at this, it seems like going for the shares of the new company is an even better deal. I need to read the documents in more detail and think about it more...

no position yet...