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Creditors Of Bankrupt Patriot Coal Seek Redress From Former Parent Peabody Coal

By
Inelegant Investor
– April 8, 2013Posted in: Stock Spinoffs

In 2007, it was all smiles as Peabody Energy(BTU) spun off Patriot Coal(PCXCQ). But loaded  with debt and retiree health and pension obligations, Patriot filed for bankruptcy in July 2012. Now, Patriot and  its creditors, led by the United Mine Workers of America, are investigating whether the spinoff was a fraudulent transfer which might give Peabody back the hot potato it sought to dispose of in 2007. Creditors will point to the large liabilities and claim that Patriot was insolvent from its inception.  Peabody will point to five years of operation prior to bankruptcy, to the financial crisis, to the weakness in the coal market, and to decisions by Patriot management. It is difficult to handicap the likelihood of these claims being successful, but it is something Peabody shareholders should be watching closely. Disclosure: The author holds no position in any stock mentioned Related articles Peabody Dispute Patriot Coal Healthcare Claims (dailyfinance.com) Patriot, creditors ask for probe of Peabody Energy (stltoday.com) 13 arrested at Peabody Energy protest in downtown St. Louis (kmov.com) Patriot investigating ‘fraud’ claim involving its creation (courierpress.com) UMWA chief blasts Patriot Coal bankruptcy move (miamiherald.com)

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Seven Years After Spin Off From Sara Lee, HanesBrands Finally Begins Paying Dividend

By
Inelegant Investor
– April 8, 2013Posted in: Stock Spinoffs

In 2006, Sara Lee, now Hilshire Farm(HSH), loaded up HanesBrands(HBI) with lots of debt and spun it off. Seven years later, after weathering a financial crisis, steadily paying down debt and improving profitability, the company has announced it will pay a quarterly dividend of $.20, beginning in June.  The dividend will be paid on June 3, to shareholders as of May 20. “Initiating a quarterly dividend is a substantial company milestone made possible by strong strategic execution, successful debt reduction and cash-flow generation, and margin-improvement prospects,” Hanes Chairman and Chief Executive Officer Richard A. Noll said. “With our successful track record and long-term outlook, the Board decided it was time to institute a regular quarterly dividend.” The company also pre-announced excellent earnings for last quarter and reaffirmed guidance for the year.  We have long been bullish on HanesBrands and are glad to see this important step in the company’s growth. Disclosure: The author owns shares in HSH and HBI Related articles Hanesbrands to Pay its First Dividend (fool.com)

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Energy Edge Solutions Soaring On The Dry, Fried Wings Of A Chicken, Err, A Gourmet Chicken

By
Inelegant Investor
– April 8, 2013Posted in: Stock Spinoffs

We love all our posts equally, really we do. It’s just that some posts are more equal than others.  We take a guilty pleasure in writing up nanocap stocks that have decided to pursue a spinoff.  While we have seen many nanocaps with value(and we own significant stakes in several), we have yet to see a spinoff in a company of this size that contained any real value in either of the surviving companies.  So when Energy Edge Technologies(EEDG), with a market cap of just $2.56 million, announced on Friday that it planned to spin off Energy Edge Solutions, we got right to work. Energy Edge Solutions, as you are almost certainly not aware, is a tiny, money-bleeding energy consultancy which helps companies optimize their energy consumption. Late last year, the company merged with the Dry Fried Wing Company, moved the energy business to a subsidiary and increased the ownership stakes of management in the subsidiary. Thankfully, the company did not insult us by promising synergies between the energy consulting business and the fried wing business. Now, just half a year later, the company is reversing the process. Sound and fury, signifying nothing? Nothing of value for shareholders, certainly. Once [...]

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Valero Set To Spin Off CST Brands on May 1 To Shareholders Of Record On April 19

By
Inelegant Investor
– April 8, 2013Posted in: Stock Spinoffs

Thanks to several alert readers who point out that, while we were asleep at the wheel, Valero(VLO) announced the final details of its CST Brands spinoff. It was just last week that we reported the company was two steps away. Those steps are now complete. Valero issued a press release on April 4, confirming that it had received a private letter ruling from the IRS granting tax free status to the spin off. Subsequent to receipt of the ruling, the company’s Board approved the spinoff. The company will be spinning off 80% of CST Brands on May 1. Valero shareholders on the record date of April 19 will receive one share of CST for every nine shares of Valero that they own.The company expects that both CST and VLO will begin trading on a when issued basis on April 17, and that CST will begin trading regular way under the ticker CST on May 2. The company will retain 20% of CST for at least six months, but plans to divest the stake once the six month period has passed. The full information statement can be found here.  CST will operate around 1900 retail locations, a bit more than half [...]

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Valero Two Steps Away From CST Brands Spinoff

By
Inelegant Investor
– March 31, 2013Posted in: Stock Spinoffs

Investors who have long been anticipating Valero’s(VLO) spinoff of retail division CST Brands(CST) won’t have to wait much longer. According to Convenience Store News, Valero Chief Financial Officer Mike Ciskowski said at a recent luncheon that the company was just waiting for an IRS ruling that the transaction would be tax free to shareholders, and for final Board approval. He said that such a ruling typically takes between four and six months and that the company had filed five months ago.  Board approval would quickly follow. Once these steps are complete, Valero will distribute 80% of CST to shareholders and sell the remaining 20% over the year that follows. Valero’s retail operation of 1900 convenience stores and gas stations including 1032 in the United States is thought to be undervalued when combined with the firm’s core refining business. The company expects that significant value will be unlocked by executing this spinoff. Disclosure: The author holds no shares in any stock mentioned Related articles Valero faces one hurdle before retail separation (mysanantonio.com) Valero Cancels Sale of California Refineries (blogs.wsj.com)

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HART IPO Set For Early April, Harvard Bioscience To Spin Off Remaining 83% Stake In 120 Days

By
Inelegant Investor
– March 31, 2013Posted in: Stock Spinoffs

In December, Harvard Bioscience(HBIO) filed for an IPO of Harvard Apparatus Regenerative Technologies(HART). Last week, the company announced that the tax free spinoff was approved by the IRS, and that an IPO of 17% of the company would be conducted in early April at an expected price of $10-$12 per share. The company will spin off the remaining 83% to shareholders 120 days after the offering closes. Disclosure: The author holds no position in any stock mentioned Related articles Harvard Bioscience prepares HART spinoff; HART readies for IPO (bizjournals.com)

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Prothena Expands Executive Team, Moves Forward With Drug Development

By
Inelegant Investor
– March 31, 2013Posted in: Stock Spinoffs

A quarter has passed since its spinoff from Elan(ELN), and Prothena(PRTA) continues to lumber forward with its development as an independent company.  Prothena issued two announcements last week. In the first, it announced the expansion of its management team, with the appointments of Dr. Martin Koller as Chief Medical Officer, and Tran Nguyen as Chief Financial Officer. “Marty and Tran bring a wealth of biotech expertise to Prothena and will play pivotal roles as we advance our research and clinical pipeline. I am pleased to welcome them to our management team,” said Dr. Dale Schenk, President and Chief Executive Officer, Prothena. “Marty’s decades of clinical leadership will forge strong trial strategy and design in multiple indications. Tran’s financial strategy, planning and management experience with public life science companies will provide critical support for the advancement of our pipeline.” Martin Koller, MD Martin Koller, MD is a board-certified neurologist with more than 20 years of experience in the life sciences industry, developing small molecules and biologic therapeutics for a diverse array of indications. Prior to joining Prothena, Dr. Koller served as Chief Medical Officer at Sonexa Therapeutics. Previously, Dr. Koller held clinical development roles and leadership positions at life sciences companies [...]

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Bad Idearc? Is Verizon On The Hook For Bankrupt Spinoff’s Debt?

By
Inelegant Investor
– March 31, 2013Posted in: Stock Spinoffs

In 2006, Verizon(VZ), spun off its declining directory business as Idearc, saddled with billions in debt. Just 28 months later, the company filed for bankruptcy, Idearc has since restructured and reemerged as SuperMedia(SPMD), but trustees for the debtors are continuing their fight against Verizon for the repayment of debt. On Friday, the trustee for the creditors filed suit, alleging that Verizon is liable for $2.85 Billion worth of Idearc debt. “Because Verizon never properly incorporated Idearc (for which it acted as promoter in arranging the indebtedness and was a direct beneficiary thereof) Verizon is liable for the indebtedness at this time,” the trustee said in yesterday’s court filing. Verizon has so far been successful in defending against liability here, most recently in a January ruling A federal judge in Dallas in January said Verizon would probably win a lawsuit over the 2006 spinoff of Idearc, rejecting claims that the business was insolvent at the time of the deal. Idearc had a value of at least $12 billion, and the “only credible evidence” shows the business was solvent when it was spun off, U.S. District Judge A. Joe Fish in Dallas said in the January decision. Fish ordered U.S. Bancorp, which [...]

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Lampert Chops Down Stake In Orchard Supply Hardware As Stock Marches Steadily Downward

By
Inelegant Investor
– March 31, 2013Posted in: Stock Spinoffs

Last January, Sears Holdings(SHLD), controlled by Eddie Lampert, spun off Orchard Supply Hardware(OSH). At the time, we were bullish on Orchard. We were wrong. Unfortunately, while the stock has plummeted, we held onto our small stake.  Lampert, however has been smarter, as he has cut his stake in half over the past year.  Orchard has struggled to maintain or grow sales despite pouring money into store remodelings. Profitability has remained elusive and the cash burn is bringing the company dangerously towards the liquidity precipice. Orchard was never a business Lampert wanted to be in; he’d tried to sell it off unsuccessfully several years prior to the spin. There is still the mystery of the preferred stock, but it would probably be best to follow Lampert’s lead, and leave the orchard. Disclosure: The author, unfortunately holds shares of OSH and OSHSP Related articles Pizarro: Orchard Supply Hardware planning improvement project on old San Jose store (mercurynews.com) Sears jumps after Lampert adds to stake (marketwatch.com)

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Can You Hear Us Now? 9 Shareholders Sue Siemens To Overturn Shareholder Vote To Spin Off Osram- Due To Bad Acoustics

By
Inelegant Investor
– February 26, 2013Posted in: Stock Spinoffs

Earlier this year, Siemens(SI) shareholders overwhelmingly approved the spinoff of 80.5% of Osram at the company’s annual meeting. Or did they? Though it was reported that 98% of shareholders who cast votes were in favor of the spin off, a group of shareholders has now stepped forward to challenge the vote.  While this lawsuit is pending, the company will be unable to proceed with the separation. What was the alleged deficiency that the shareholders claim in their suit? The volume. The nine investors plan to argue that Siemens did not conduct the shareholder meeting properly because of acoustics problems, as Chief Financial Officer Joe Kaeser partly spoke in an inaudible manner, Frankfurter Allgemeine Zeitung reported. We’re not sure what they hope to accomplish, but based on what is reported(combined with our profound ignorance of German law) it doesn’t sound like they have much of a claim at all. The most likely outcome is that the transaction is delayed while this case is decided. Dsiclosure: The author holds no position in any stock mentioned Related articles Siemens shareholders plan to challenge Osram spin-off: report (news.yahoo.com) Siemens’ Osram Spinoff Seen as Prelude to More Disposals – Bloomberg (bloomberg.com)

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