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If there's a buyout of ORH, it will be done no later than...

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I'm not going to vote because I have no flippin' clue - that's why I'm here, attempting to get one.  But I would have to wonder if it's true that the new debt offering has anything to do with a potential buyout of ORH, why would they wait?  Maybe a month or two for regulatory or other procedural reasons, but any more than that and it seems it wouldn't make sense to carry the interest without making the move.


That's not a rhetorical question.  I really have no idea and look forward to lurking while those who do discuss it.


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Read the Northbridge buyout announcement:


The proposed transaction also represents a 31.8% premium over the 30-trading day volume-weighted

average closing price for the period ended November 28, 2008 of $29.59


Clearly, it was a selling point that the premium was 31.8% over the 30-trading day volume-weighted average closing price.


So, they aren't going to want to wait another 30 trading days from today for ORH given that they are tipping their hand already and the price has/will rise accordingly (if you believe in the buyout thesis).


It would not be a great press release to say that the price is only 5% or 10% over the average 30-trading day period -- it's better to make the offer sound as generous as possible. 


The $400 million note offering is scheduled to be completed on August 18th (Tuesday).  I would expect they would wait to be certain they have the cash in hand first... then pounce.


Don't forget I'm heavily long ORH now so my mentality is obviously self-serving at this point.

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So what's the rationale for a buyout?

I remember a buyout being discussed on the old board. Still hasn't happened yet.

In the meantime some of the best companies in the world have gone to hell and back.


1)  Reward the ORH management and other large holders for sitting tight.  In late 2006, ORH did a share issue and Andy wrote in the Annual Report that it was terrific that ORH shares would trade at a higher premium with the new larger float.  But since then they've been buying the shares back, so it stands to reason this would piss him off now that the float is going down and thus... by Andy's logic.... the P/B premium.  So to reward his patience (and those of others but I think Andy is a key enough player to focus on here).  Andy's shares are worth about $20m -- putting an extra $8m in his hands at a P/B of 1.3x.  I'm sure the NB management for example was very grateful to get that cash at a time when it could be reinvested.  How painful can it be to reward key employees with stock and have that stock trade at a pathetic valuation despite excellent business performance?  Think back to 2001 where there were combined ratios of 103.1% at ORH (excluding cat losses).  It traded at a big premium then (1.37 at IPO) and today it's regularly trading at a sizable discount.  I think Andy might, from time to time, wish he could sell a little bit for somewhat of a fair price.


Anyhow, this is but one good reason to take it back.  Not big enough in it's own right perhaps, but if you were Andy and saw NB get treated similarly, you might be clearing your throat "Ahem... what about me?".



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