ExpectedValue Posted October 11, 2010 Share Posted October 11, 2010 http://finance.yahoo.com/news/Biglari-Holdings-Proposes-To-prnews-664688558.html?x=0&.v=1 Biglari Holdings Inc. (NYSE:BH - News) today announced a proposal to acquire 100% of the issued and outstanding shares of common stock of Fremont Michigan InsuraCorp, Inc. (OTC Bulletin Board:FMMH.OB.ob - News) that it does not already own for a purchase price of $29 per share in cash. The purchase price represents a 41% premium over the closing price of Fremont's common stock on October 11, 2010. Biglari Holdings is presenting its proposal to the Fremont Board, expecting its Board to exercise its fiduciary duties and therefore meet with Biglari Holdings to reach a mutually satisfactory transaction. Link to comment Share on other sites More sharing options...
Guest Bronco Posted October 11, 2010 Share Posted October 11, 2010 I went from hating this guy to loving this guy. Go Biglari! Link to comment Share on other sites More sharing options...
shalab Posted October 12, 2010 Share Posted October 12, 2010 Bronco - do you own fmmh.ob? Link to comment Share on other sites More sharing options...
ragnarisapirate Posted October 12, 2010 Share Posted October 12, 2010 Bronco - do you own fmmh.ob? I am betting the answer is yes. There is a ton of float that Sardar is getting access to here. I am curious how much he is going to be able to throw off into equities. While I sold off all but a single share of my BH, this is still exciting stuff! Link to comment Share on other sites More sharing options...
maxprogram Posted October 12, 2010 Share Posted October 12, 2010 I think this exemplifies the problems Biglari may face going forward. Right now, Fremont's executives are probably scrambling to do whatever they can to see this doesn't go through. Right or wrong, it doesn't matter -- these are the kinds of things (like getting local politicians involved) that Biglari will likely see again in the future. Speaking only about the Fremont deal, he also may have been able to get it cheaper than $29 if he tried using a little finesse and been a tad more patient. Link to comment Share on other sites More sharing options...
Myth465 Posted October 12, 2010 Share Posted October 12, 2010 I dont really see what all the fuse is about. I would like to see his track record in non take over / arms length situations. I also think maxprogram is correct, he has shot himself in the foot and given every executive a reason not to sale. Link to comment Share on other sites More sharing options...
Guest Bronco Posted October 12, 2010 Share Posted October 12, 2010 No, I don't own any. Used to. This guy is now the most entertaining guy on wall street. Also, I think Fremont management is a disgrace. They will no doubt screw their shareholders on this. Link to comment Share on other sites More sharing options...
bargainman Posted October 12, 2010 Share Posted October 12, 2010 I seem to remember reading that Buffett also got into a situation like this where the entire town was against him. I'm pretty sure I read about it in the Snowball. I think the town gathered enough funds to buy the company back from him or something, but it sounded like it was pretty charged and that he was definitely being vilified as the outsider activist investor. Anyone remember the company/situation I'm talking about?? Link to comment Share on other sites More sharing options...
twacowfca Posted October 12, 2010 Share Posted October 12, 2010 I seem to remember reading that Buffett also got into a situation like this where the entire town was against him. I'm pretty sure I read about it in the Snowball. I think the town gathered enough funds to buy the company back from him or something, but it sounded like it was pretty charged and that he was definitely being vilified as the outsider activist investor. Anyone remember the company/situation I'm talking about?? Dempster Manufacturing. The situation was so distasteful that he never wanted to go there again. Link to comment Share on other sites More sharing options...
Ballinvarosig Investors Posted October 12, 2010 Share Posted October 12, 2010 The offer today is just a fraction under 1.1 times book value, which is probably a small premium over current valuations for similar companies. This time last year, I would have told Biglari to get stuffed. I am more inclined to accept the offer because performance in Fremont has been deteriorating. Link to comment Share on other sites More sharing options...
Guest Bronco Posted October 12, 2010 Share Posted October 12, 2010 If you have something worth $20 and someone offers you $29, you would be a fool not to take it. I see a Jerry Yang revival coming though. I have no stake in the game - will buy shares in BH at the right price though - but I find BH a really interesting story. Not really too many dull moments. Link to comment Share on other sites More sharing options...
Ballinvarosig Investors Posted October 12, 2010 Share Posted October 12, 2010 If you have something worth $20 and someone offers you $29, you would be a fool not to take it. Are you out of your mind? The initial $24.50 offer was an insult. He wasn't even offering book value for a highly profitable operation with good underwriting and prudent reserving. Even in today's market, the offer was ridiculous. Since the initial offer, the business has grown and book value has correspondingly increased; the business is clearly worth more now, than it was 9 months ago. Just because Dick Dunning is trying to save his own skin, it doesn't mean that he's incompetent or that the operation that he's running is useless. Link to comment Share on other sites More sharing options...
ragnarisapirate Posted October 12, 2010 Share Posted October 12, 2010 Bronco, If you haven't already seen this, it is a great recap BH's involvement with Freemont. http://www.sec.gov/Archives/edgar/data/93859/000092189510001496/ex991to13da307428006_101110.htm This letter is great stuff! Link to comment Share on other sites More sharing options...
Guest Bronco Posted October 12, 2010 Share Posted October 12, 2010 As of yesterday, the stock was barely worth more than $20 I don't know why you are throwing around $24 - I said $29. That is a fair premium to the current stock price. As I said, some shareholders will get Yanged on this this (i.e. screwed). Unless you bought at $30, I think most shareholders would be happy with cash, which is as good as money. If $20 is below FMV, I would expect the CEO and his local congressman crooked friends would be buying hand over fist. Don't know if that is true or not though. Link to comment Share on other sites More sharing options...
Guest Bronco Posted October 12, 2010 Share Posted October 12, 2010 Ballin - maybe you can disclose what you consider FMV for other stocks. If I had known FMMH was really worth $24 yesterday, I would have bought it for $20 and sold it to you for $24. Don't get mad - I am just having a little fun - but I am shocked that shareholders wouldn't be happy with a 40% premium cash offer. Bulls make money, bears make money, pigs... Nevertheless - to those on the board that stuck with FMMH, congrats. You should do well today. I hope you get want you want, whether it is a higher offer, the current offer, or a rejection by the board. Link to comment Share on other sites More sharing options...
Myth465 Posted October 12, 2010 Share Posted October 12, 2010 I think its a fair deal. Plenty of decent insurers under book value right now. I think most people will take 1.25 BV and be quite happy. I know I would. You could just rotate into another quality insurer at BV or a slightly smelly one at 80% BV. Link to comment Share on other sites More sharing options...
Ballinvarosig Investors Posted October 12, 2010 Share Posted October 12, 2010 As of yesterday, the stock was barely worth more than $20 Here was me thinking that the Efficient Market Hypothesis was dead in its grave. I don't know why you are throwing around $24 - I said $29. That is a fair premium to the current stock price. As I said, some shareholders will get Yanged on this this (i.e. screwed). Unless you bought at $30, I think most shareholders would be happy with cash, which is as good as money. $24.50 was the original tender offer made back in December 2009. Link to comment Share on other sites More sharing options...
Guest Bronco Posted October 12, 2010 Share Posted October 12, 2010 Ballin - I hope it is dead in its grave. It gives smart investors like you and me a chance to make a lot of money. Best of luck with FMMH - today was a big jump! Link to comment Share on other sites More sharing options...
Ballinvarosig Investors Posted October 12, 2010 Share Posted October 12, 2010 By the way, I'm surprised that no one has commented on the nature of the offer. All-cash, unlike the cash + shares deal that he offered last time. I will leave you guys to make what you will of that. Link to comment Share on other sites More sharing options...
cooger72 Posted October 12, 2010 Share Posted October 12, 2010 I think its a fair deal. Plenty of decent insurers under book value right now. I think most people will take 1.25 BV and be quite happy. I know I would. You could just rotate into another quality insurer at BV or a slightly smelly one at 80% BV. I think the offer is 1.1x book, based on the last Q, anyway. At the end of the day, it's the same premium Fairfax paid for Odyssey, and it's about what you can buy Fairfax for now... I'll trade FMMH shares for FRFHF on an even basis all day... (Although I'd rather buy at a discount). In any case, most of my thesis for being in FMMH was that you get good performing insurer at a discount with a money manager chomping at the bit to buy it up. Putting this one in the win column. Link to comment Share on other sites More sharing options...
Ballinvarosig Investors Posted October 12, 2010 Share Posted October 12, 2010 >I'm surprised that no one has commented on the nature of the offer. All-cash, unlike the cash + shares Bilgari doesnt get paid if he increases the number of shares. I wasn't quite getting at that. Link to comment Share on other sites More sharing options...
Myth465 Posted October 12, 2010 Share Posted October 12, 2010 I think its a fair deal. Plenty of decent insurers under book value right now. I think most people will take 1.25 BV and be quite happy. I know I would. You could just rotate into another quality insurer at BV or a slightly smelly one at 80% BV. I think the offer is 1.1x book, based on the last Q, anyway. At the end of the day, it's the same premium Fairfax paid for Odyssey, and it's about what you can buy Fairfax for now... I'll trade FMMH shares for FRFHF on an even basis all day... (Although I'd rather buy at a discount). In any case, most of my thesis for being in FMMH was that you get good performing insurer at a discount with a money manager chomping at the bit to buy it up. Putting this one in the win column. Sorry I should have posted more detail. Its at 1.1, but I think he would be open to going higher. I think this was a sit down and lets talk offer, and not a final offer. I dont know why anyone wouldnt let this go for 1.25 of BV. BV is likely higher due to 3 months having gone buy. Link to comment Share on other sites More sharing options...
Parsad Posted October 12, 2010 Share Posted October 12, 2010 1.1 times book is a fair value for an insurer in this market...remember, Dunning is in a low interest rate environment. Insurance isn't going to be a breeze the next few years unless you can generate investment income or underwrite more efficiently. At 1.25 times book, he would be paying up for the company and it's probably not worth it unless he can guarantee himself significant investment returns. He doesn't know what contracts they have been writing in the last year and if the premiums are adequate. There would be little margin of safety at 1.25 times book. Cheers! Link to comment Share on other sites More sharing options...
ragnarisapirate Posted October 12, 2010 Share Posted October 12, 2010 Question: Does any one know what the law in Michigan is regarding the investment of float? If he can invest every bit of the company's cash immediately, or conversely, not invest it any differently than now, it would totally change what the company is worth (a pretty obvious observation). It also depends on what you think he can grow the newly acquired cash at. I suppose that what I am getting at, is that the intrinsic value of the company changes, based on who is running it, and what they plan to do with the float... Which leads me back to my original question. How much of the $11.8 million in cash, and $69.1 million in short term investments can he safely/legally deploy, and in to what type of investments? Furthermore, do the earnings and cash flows of the parent company effect the ratings and such of Fremont? Link to comment Share on other sites More sharing options...
Guest HarryLong Posted October 12, 2010 Share Posted October 12, 2010 Gentlemen, I will be accepting congratulations, toasts, high fives, kudos, champagne, and boxed chocolates. ;D It has been an honor to make anyone who listened to me gobs of money. ;D If any of the Houston crew want to meet up for drinks, I am up for it. Let's have a party. Link to comment Share on other sites More sharing options...
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