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Non-Tech : SPIN-OFFS "secret hiding places of stock market profits"
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To: Terry Maynard who wrote (115)3/1/1998 7:39:00 PM
From: Stewart Whitman  Read Replies (1) of 1185
 
1. Why is OFIS doing this?

OFIS needs cash to expand its office supply business. OFIS has grown by acquisitions and not any operational skill or improvement. Management at OFIS stands to benefit greatly because of their own stock options. The stock is actually cheaper than it looks - some of the businesses they bought have not fully factored into sales for full a full year - the P/S was more like 0.5 before the restructuring was announced, which is low.

Clayton, Dubilier & Rice (CD&R) supplies the capital. They put $270 million down to acquire control of the company and borrow another $800 million to leverage their investment. I understand that CD&R also owns a third of Kinko's - similar business to MailBoxes, etc. and the like.

Forbes had a good set of article on how LBOs work:

forbes.com

2. What will be the stock ratios for the new companies?

Not announced yet, but, with a 100 million shares out after the buy-back, these smaller companies are going to have to be about one for every 4 shares so that they start with a reasonable stock price (e.g. ~ $10).

3. Are there stock incentive plans for executives of New OFIS and the new companies?

Not announced yet.

Stew
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