I’ve been out of vacation last week, so I haven’t updated the blog in a while. There has been some interesting updates related to GGP.
Simon has been discussing with GGP its $15/share offer. The offer is similar to BAM’s offer but doesn’t have any of the warrants that BAM’s deal includes. The Simon offer is similar to BAM but has one major difference, any investment by Simon in GGP would create anti-trust issues. I’ve mentioned in the past that Simon could work around these anti-trust issues. Although it seems that Simon wants some say in GGP out of the investment, which will make it tough for anti-trust issues to be resolved. Simon has brought in 4 other investors into its offer for GGP, that is an attempt by Simon to allay the anti-trust issues. I think Simon still needs to offer something more to put aside the trust issues.
GGP also pushed back its court meeting from April 29th to May 4th. I think GGP is expecting better offers between now and May 4th. It wouldn’t be a shock is BAM/Pershing/Fairholme improved its offer, Simon got serious about buying GGP, or someone else comes to the game. In all, I think the delay in the court meeting is great thing for shareholders. I expect an interesting weekend.
ATP Oil & Gas has been on a tear recently. Management executed beautifully on the Telemark project. And now we have this:
ATP Oil & Gas Corporation today announced that it intends to offer, subject to market conditions, $1,500 million aggregate principal amount of senior second lien notes due 2015 in a private offering. ATP intends to use the net proceeds of this offering to repay its existing senior secured term loans in full, to pay associated fees and expenses and for general corporate purposes. Concurrently with the consummation of this offering, ATP intends to replace its existing senior secured credit facility with a new senior secured credit facility. The consummation of this offering is conditioned upon the concurrent termination of its existing credit facility and entering into the new senior secured credit facility.
With oil selling at recent highs of mid-80s, the asset valuation of ATP is looking very strong. Also with the debt market looking like it is starting to function, it will be easier for ATP to raise capital. The company raising new capital bodes exceptionally well for shareholders. 2010 will be a strong year for ATP on operational side, which should reflect in the company’s share price.
– I saw the crisis coming, why didn’t the Fed: An op-ed by Michael Burry on how he saw the crisis coming and why the Fed missed it.
– Juiced for growth: How James White led Jamba Juice’s turnaround in the mist of the 2009 crisis
– The Municipal Market: A good write-up by Rick Bookstaber on the next crisis, the Muni debt
– Q&A with Buffett (Univ of Kansas, 2005): Although this is dated, the Q&A focuses on investing for individuals with small amounts of capital.
– Interview with Prem Jain: He is the author of a new book on Buffett, Buffett Beyond Value.
It was only a few weeks ago that Ternium said it would expand its operations in Mexico. Today we hear this.
Ternium S.A. announced today that it has entered into a definitive agreement to acquire a 54% ownership interest in Colombia-based Ferrasa through a capital contribution in the amount of US$74.5 million. Upon completion of this transaction, Ferrasa will have a 100% ownership interest in Sidecaldas, Figuraciones and Perfilamos del Cauca.
Ferrasa is a leading long and flat steel products processor and distributor. Sidecaldas is a scrap-based long steel making and rolling facility, with an annual production capacity of approximately 140,000 tons. Figuraciones and Perfilamos del Cauca manufacture welded steel tubes, profiles and beams. These companies have combined annual sales of approximately 300,000 tons, of which approximately 70% are long products and 30% are flat and tubular products, used mainly in the construction sector.
Through these investments Ternium expects to expand its business and commercial presence in Colombia, a country that is experiencing significant growth and is presently the fifth largest steel consuming market in Latin America, as well as in Central America.
Now these are small acquisitions compared to what we are used to. Although this is a strategic acquisition allowing it to grow in one of the biggest steel markets in Latin America. Also, the importance of this deal is management is now looking to expand. Management must be expecting markets to have rebounded and growing.
I still believe in 2010 we will hear a big acquisition or growth by Ternium. I think their current business is going to make strong cash flow and with the payments from Mr. Chavez, Ternium should have plenty of cash to pay down debt and to look to lever up for further growth.
– Art of Stock picking: When Charlie Munger speaks, value investors listen.
– Energy for Asia – an overview: An article by Claire Barnes, who runs Apollo Investment Management. A good primer on energy usage for different Asian countries.
– World’s Strangest Tax Law: With the tax filing deadline approaching, a few good chuckle at some crazy tax laws
There hasn’t been much news on the GGP front. After news developments on an hourly basis, we have gone almost two weeks without major news on GGP. For patient investors, the reward will be worth the wait.
Steven Roth, of Vornado Realty Trust, recently published his annual letter. In there he discussed GGP and the likely buyout price. On discussion about distressed sellers/buyers, he mentioned:
Analyst Michael Billerman recently noted that the anticipated avalanche of “distressed sellers” has yet to materialize, thereby creating a class of “distressed buyers.” Legendary trader Ace Greenberg famously noted that there are no illiquid markets, just incorrect prices. Here are my observations:
· Today, lenders are not selling at panic distressed prices. This is very different than the 1990s – who can forget the RTC, etc.
· Sellers, and sellers who were lenders (and not natural holders) will flood to market as prices rise. Assets will soon trade a plenty (just look at the volumes flooding into special servicing) but in controlled processes at clearing, but not distressed prices.(6)
The footnote (6) states:
(6) Look at General Growth – all the money was made buying securities in the panic. Whoever the final acquirer turns out to be, they will be paying a fair, not distressed price.
We have one of the best investor/manager in the REIT space staying GGP will sell for fair price. The big money was made when investors sold GGP as they worried about the company filing bankruptcy and getting liquidated. It created an excellent opportunity for the distressed buyers, to capitalized on the distressed sellers mistake. We are now in a market where there is very little, if any, distressed selling happening. If you compare today’s market to the 1990s, we are in a very different market.
GGP so far has gotten offer, Simon’s first offer, that was assuming a distressed market valuation. It is clear that Simon is going to offer a much more realistic valuation/offer in its second round.
Ackman has mentioned that ‘fair value’ for GGP is in the $20-40 range. This would mean a 50-150% upside from current prices. I don’t know where GGP will eventually end up but I still expect plenty of upside from the current prices.