SHOO
Thought this might be of interest - no link for it because it came in S&A Digest email (from Stansberry & Assoc).
I don't have a position in SHOO, but I'm looking it over and may decide to take a position.
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In a recent 13D filing with the SEC, the Clinton Group, a $1 billion money manager, suggested ways the Steve Madden Shoe company might optimize its cash. Whether Steve Madden will follow the advice, we can't say. But we liked the letter because it shows why buying cash-laden stocks is often a great bet:
"The Company has substantial, unrestricted cash balance, which we estimate will grow to be at least $90 million by year end, representing approximately 22% of the current market capitalization. Clearly, this is an inefficient capital structure given the Company's free cash flow generation, ongoing strong earnings, and limited capital expenditure requirements. We believe that $72 million of this cash, combined with a modest senior debt financing of $110 million, could be used to purchase 40% of the outstanding shares of the Company, resulting in pro forma leverage of 1.5x net debt to 2007E EBITDA. The Company could execute such a buyback at a range above $21.00 per share or a 13.5% premium to current market prices. The extraordinary accretion from this transaction produces implied stock prices well north of current levels and a premium to our proposed tender price of greater than 20%." |
