Let's look at HNH
It's in the same type of biz as DYA was. DYA was around 30
when it was brought up here on this thread. Moved to 45 with
WHX's original bid, and eventually hit 90. That accounts
for HNH's premium to the bid.
HNH provides diversification, is cyclical but
has solid earnings of about $2 share pretty consistently with good
ROE. To the 360M price you have to add the 120M in LT debt net of
cash. Is it a good deal for WHX? The CEO seems to be pursuing
some sort of acquisition strategy - he didn't get Teledyne
or DYA and turns to others in the general industry and
sees HNH. Looks good, so let's float some debt and buy
this sucker. That explains the senior notes (I couldn't
figure out why they were taking on more debt with their
liquidity - in retrospect we should've been looking ourselves
for the next likely acquisition - <g>).
How about WHX shareholders? Well, obviously the CEO knows
value when he sees it, buying back a bunch of WHX at less
than $10, and we know Teledyne and DYA ultimately were
worth much more than they were when WHX first showed interest.
Is HNH another example of value revealed to the world?
The market thinks so, with shares over $2 over the offer.
Will WHX get its prize finally? We'll see, but it appears
that the market has said, "We want a better price."
Is this deal accretive? It's financing the $480M
price at 9%, which is 43 million in interest per year.
1996 EBIT is 68M. So am I correct in saying it's mildly
accretive? And if the price goes up to say $40 share,
are we breaking the threshold? Where oh where has
my margin of safety gone?
Them's my thoughts.
Good Investing,
Mike |
