Kaiser Group declares big dividend

[DesertCat]

I mentioned on another thread that I owned this dog, er disappointing value trap. Friday they announce a $6 dividend (trading as low as $29.50). It's a very curious development, that might be an interesting minor opportunity. A more detailed musing on the topic is posted here.

[Scorpion Man]

Everything else being equal I agree with the blog that this seems like the worst of all worlds. Have you figured out if it somehow relates to management incentives/comp in some way? That is the best place to start to figure out why they would take this tack.

[DesertCat]

[ QUOTE ]
Everything else being equal I agree with the blog that this seems like the worst of all worlds. Have you figured out if it somehow relates to management incentives/comp in some way? That is the best place to start to figure out why they would take this tack.

[/ QUOTE ]

The CEO told me it was a board decision (i.e. he wasn't telling me anything interesting), but I doubt it's a management incentive because mgmt has no control over them. If management has special incentives they probably relate to an acquisition, along with an orderly cleanup of the old businesses, i.e. things mgmt has control over (the last DEF14 says little about how their incentives are figured and CEO doesn't have an employment contract).

I'm wondering if the Tennenbaums just need some cash for some of their other investments. This way they gets some case without commiting to a liquidation and as they keep looking at targets, and payout the rest later in a liquidation if they don't find anything good.

[DesertCat]

Kaiser Group looks like it's going private.

http://stock-notes.blogspot.com/

[schnoodleC]

Cat,

Do you have any thoughts beyond what is on your blog? Here is my group's thinking:

Michel Tennenbaum, who controls the company, is a private equity guy, and he is interested in finding a business which Kaiser could acquire and make a big profit on. If they did, the stock would hopefully go up.

Essentially, we have a private equity type of company which is selling for $26 with a book value of $37. Now that's hard to beat, even though it has been frustrating holding it so far. That's my take on it.

Bottom line: It's not good, but it isn't bad, either. At least Tennenbaum is thinking about the company and is trying to keep expenses reasonable.

[DesertCat]

I agree with your thinking. One risk is that sometimes the controlling shareholders will try to take a company private at an unfairly low price. I don't expect that to happen here as there are some activists involved.

I think Tennenbaum will make something out of this sows ear, the problem is how long it will take, and how long do you want to be a shareholder if they no longer have to file with the SEC?

[NajdorfDefense]

If you buy 50.1% of the shares, how can that ever be 'an unfairly low price?'

that's set by the market, no?

[DesertCat]

[ QUOTE ]
If you buy 50.1% of the shares, how can that ever be 'an unfairly low price?'

that's set by the market, no?

[/ QUOTE ]

A going private transaction can be involuntary. For example, the board (which the Tenenbaum's control) could agree to sell the company to the Tennenbaums for $20 per share. The Tennenbaums would be buying everyone else's shares at an unfairly low price.

I don't think anything like that would happen here. The Tennenbaums don't seem like the type, and there would definitely be a lawsuit because the value is so obvious. But this can happen in cases where the companies value is less clear, insiders understand exactly how much it's worth and buy it on the cheap.