Category: Articles

Jane Genova Reports

RI SC RULING EXPECTED 6/1 or 6/2 – Informed sources indicate

Informed sources reported to me today that a ruling is expected from the Rhode Island Supreme Court on the the lead paint public nuisance appeal this coming Tuesday or Wednesday.

Those sources are anticipating a decision favorable to the three defendants Sherwin-Williams (SHW), NL Indusries (NL) and Millennium Holdings. How favorable is the issue. There could be a third trial rather than the whole enchilada being tossed.

We lead paint watchers are also very interested in the opinion of the RI SC on contingency, particularly in relation to the issue of separation of powers.

Disclosure (“none” means no position):Long SHW, none

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Since he has billions to invest, it bears listening to him..

Doll discusses the S&P, Oil (USO), the Fed, European Bankers, Speculation, Merrill Lynch (MER)

Disclosure (“none” means no position):None

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Oil, JC Penny, War, Recession

– The speculators?

– This is great “outrage“.

– Of course they have…..we are winning it

– Well, maybe that is because we really have not had one in that long?

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Oil, JC Penny, War, Recession

– The speculators?

– This is great “outrage“.

– Of course they have…..we are winning it

– Well, maybe that is because we really have not had one in that long?

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UPGRADES
Coldwater Creek (CWTR)- CL King Accumulate » Strong Buy
SuccessFactors (SFSF)- Wedbush Morgan Hold » Buy
Zoran (ZRAN)- Longbow Neutral » Buy
Lincare (LNCR)- Wachovia Mkt Perform » Outperform
Pantry (PTRY)- Friedman Billings Mkt Perform » Outperform
Check Point Sftwr (CHKP)- Lehman Brothers Equal-Weight » Overweight
Corinthian Colleges (COCO)- Lehman Brothers Equal-Weight » Overweight
Host Hotels (HST)- Robert W. Baird Neutral » Outperform
City National (CYN)- Keefe Bruyette Mkt Perform » Outperform

DOWNGRADES
i2 Tech (ITWO)- Susquehanna Financial Positive » Neutral
F5 Networks (FFIV)- McAdams Wright Ragen Buy » Hold
Goldman Sachs (GS)- Wachovia Outperform » Mkt Perform
Spectrum Brands (SPC)- BMO Capital Markets Market Perform » Underperform
Research In Motion (RIMM)- JMP Securities Mkt Outperform » Mkt Perform
PG&E (PCG)- Jefferies & Co Buy » Hold
MGM Mirage (MGM)- JP Morgan Overweight » Neutral
Red Hat (RHT)- Oppenheimer Outperform » Perform
Entergy (ETR)- Banc of America Sec Buy » Neutral
AstraZeneca (AZN)- HSBC Securities Neutral » Underweight
British Sky Brdcst (BSY)- JP Morgan Overweight » Underweight
WuXi PharmaTech (WX)- Oppenheimer Outperform » Perform

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UPGRADES
Coldwater Creek (CWTR)- CL King Accumulate » Strong Buy
SuccessFactors (SFSF)- Wedbush Morgan Hold » Buy
Zoran (ZRAN)- Longbow Neutral » Buy
Lincare (LNCR)- Wachovia Mkt Perform » Outperform
Pantry (PTRY)- Friedman Billings Mkt Perform » Outperform
Check Point Sftwr (CHKP)- Lehman Brothers Equal-Weight » Overweight
Corinthian Colleges (COCO)- Lehman Brothers Equal-Weight » Overweight
Host Hotels (HST)- Robert W. Baird Neutral » Outperform
City National (CYN)- Keefe Bruyette Mkt Perform » Outperform

DOWNGRADES
i2 Tech (ITWO)- Susquehanna Financial Positive » Neutral
F5 Networks (FFIV)- McAdams Wright Ragen Buy » Hold
Goldman Sachs (GS)- Wachovia Outperform » Mkt Perform
Spectrum Brands (SPC)- BMO Capital Markets Market Perform » Underperform
Research In Motion (RIMM)- JMP Securities Mkt Outperform » Mkt Perform
PG&E (PCG)- Jefferies & Co Buy » Hold
MGM Mirage (MGM)- JP Morgan Overweight » Neutral
Red Hat (RHT)- Oppenheimer Outperform » Perform
Entergy (ETR)- Banc of America Sec Buy » Neutral
AstraZeneca (AZN)- HSBC Securities Neutral » Underweight
British Sky Brdcst (BSY)- JP Morgan Overweight » Underweight
WuXi PharmaTech (WX)- Oppenheimer Outperform » Perform

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Here are the applicable portions.

Section 3.1 New Directors.

In accordance with the provisions of this Article III, the Company shall take appropriate actions, once nominees are identified satisfying the requirements of Section 3.2, to add three (3) new members to the Board (the “New Directors”). It is the intent of the parties that such additions shall occur as promptly as practicable, but in no case later than the Company’s 2008 Annual Meeting of Stockholders.

Section 3.2 Selection of New Directors.

(a) An independent search agency has been engaged to identify a nominee for one (1) of the New Director positions (the “Specified Director”) pursuant to criteria previously determined by the Nominating and Corporate Governance Committee and all of the directors shall be permitted to propose persons as suggested candidates for the Specified Director to such independent search agency. A candidate identified shall be considered by the Nominating and Corporate Governance Committee in accordance with its regular policies and procedures, which shall include, without limitation, consideration of such candidate’s background, competencies and experience. A candidate shall be recommended by the Nominating and Corporate Governance Committee as a nominee for election by the Board as the Specified Director only if he or she is (a) deemed to be “independent” pursuant to the Company’s corporate governance principles and the rules and regulations of the New York Stock Exchange and (b) reasonably acceptable to both ESL and a majority of the members of the Nominating and Corporate Governance Committee. Only a nominee who is recommended by the Nominating and Corporate Governance Committee shall be presented to the Board as a potential nominee for election as the Specified Director.

(b) Two (2) New Directors (the “Non-Specified Directors”) shall be appointed from nominees identified by ESL, including persons suggested by other directors to ESL who are reasonably acceptable to ESL (any such person, a “Candidate”). Each Candidate identified shall be considered by the Nominating and Corporate Governance Committee in accordance with its regular policies and procedures, which shall include, without limitation, consideration of such Candidate’s background, competencies, experience and affiliation with ESL (if any). Only candidates which are reasonably acceptable to both ESL and a majority of the members of the Nominating and Corporate Governance Committee may be recommended by the Nominating and Corporate Governance Committee for election to the Board. Either or both of the two Candidates may, at ESL’s discretion, be an officer of ESL and its affiliated investment entities. Each candidate shall qualify as “independent” pursuant to the Company’s corporate governance principles and the rules and regulations of the New York Stock Exchange. The Company will use its reasonable best efforts to have the Nominating and Corporate Governance Committee promptly recommend Candidates for election to the Board once candidates are identified satisfying the requirements above.

(c) Subject to the nomination of directors in accordance with the provisions of Section 3.2(a) and 3.2(b), the Company’s Board of Directors shall promptly take all action required to cause the Specified Director and Non-Specified Directors to be so elected.

Section 6.3 Future Sales and/or Transactions Involving an Acquisition of the Company.

(a) ESL shall not dispose or agree to dispose of any shares of Common Stock pursuant to any agreement, arrangement or understanding (whether or not in writing), including by way of merger or other business combination, at a price above the market price per share prevailing at the time of such agreement, arrangement or understanding, without taking appropriate steps to ensure that the purchaser of such shares simultaneously provides all other holders of Common Stock with an opportunity to dispose of a number of shares (representing, for each Company stockholder, the same proportion of owned shares of Common Stock as ESL proposes to dispose of) in such transaction on the same terms and conditions, including price per share, as ESL. It is understood that (i) sales in the open market shall be deemed to be at prevailing market prices and (ii) (a) the transfer of Shares of Common Stock from one ESL affiliate subject to this Agreement to another, (b) distributions by ESL to its shareholders or limited partners, and (c) sales to the Company or third parties approved by at least two directors representing a majority of the independent, disinterested directors unaffiliated with ESL, shall not constitute a disposition subject to this Section 6.3(a).

(b) ESL shall not pursue, either directly or indirectly, including as part of a group, a transaction resulting in the acquisition of all or substantially all of the shares of Common Stock not owned by ESL or by such group (including, for example, in a leveraged recap in which “stub equity” is left in the hands of some or all of the non-ESL stockholders) unless the following procedures and requirements are followed and satisfied. The Board shall establish a committee of independent, disinterested directors unaffiliated with ESL (the “Special Committee”) to review and evaluate any transaction (other than any such transaction in which ESL would be treated on the same basis as all other Company stockholders) proposed by ESL or in which ESL intends to participate, with full authority to negotiate and recommend the terms of such a transaction on behalf of the Company and the non-ESL stockholders. ESL will proceed only with a transaction recommended by the Special Committee, unless the acquisition is structured as a “non-coercive” tender offer, followed by a merger at the same price if the offer is successful, not subject to the test of “entire fairness” in accordance with applicable Delaware case law (e.g., the decisions involving Silconix and Pure Resources), assuming, for these purposes, that the Company had been incorporated under the laws of the State of Delaware and was subject to Delaware law.

(c) The provisions of this Section 6.3 may be enforced by any directors constituting a majority of the independent, disinterested directors unaffiliated with ESL or, in the absence of any such persons sitting on the Board, through a derivative action.

Section 6.4 Information Regarding Common Stock.

If ESL increases or decreases the number of Subject Shares it owns at any time prior to the Termination Date, ESL shall give prompt notice to the Company of such increase or decrease (which notice may be satisfied by a filing of a Form 4 with the Securities and Exchange Commission on a timely basis). If requested by ESL, the Company shall promptly provide ESL with the number of Outstanding Shares.

Section 8.1 Termination.

This Agreement and all of its provisions shall terminate upon the Termination Date; provided that Sections 8.3, 8.4, 8.5, 8.7, 8.8, 8.9, 8.10, 8.13 and, in the case of clause (b) below, 6.3 of this Agreement shall survive any termination of this Agreement. For purposes of this Agreement, “Termination Date” means the earliest of (a) the date upon which the Subject Shares shall, in the aggregate, constitute less than 25% of the Outstanding Shares, (b) the date upon which the Aggregate ESL Percentage shall exceed 50% and (c) the date upon which the Parties (which, in the case of the Company, shall have been authorized by at least two directors representing a majority of the independent and disinterested members of the Board unaffiliated with ESL) mutually agree in writing that this Agreement and all of its provisions shall no longer be in effect. Nothing in this Section 8.1 shall be deemed to release any Party from any liability for any breach by such Party of their representations and warranties or any other terms and provisions of this Agreement.

Full Filing

Disclosure (“none” means no position):None

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I posted the agreement between Eddie Lampert and Autozone (AZO) this morning and got a flood of questions. Reader Jeff answered 90% of them with this post.

“EBITDAR- Earnings Before Dep./Amor, Interest, Taxes, Rent (lease payments).

Thus, the company can take on long term debt of 2.5x its annual EBITDAR. Relatively modest leverage.

The voting restriction for ESL is basically saying that, if he continues to accumulate, the shares he gets over a certain level (40% now, coming down to 37.5%), he will need to vote them in proportion to how the rest of AZO’s shareholders vote.

So, if all non-ESL shareholders vote 50/50, in aggregate, ESL will be required to vote any of its shares in excess of 40% 50/50 as well. This will stay in effect as long as ESL’s ownership remains in the range of 25% – 50%.

So Lampert gets his wish that they continue to recap a bit, taking on more leverage and buying back more shares, in exchange for some voting concessions.”

Now, something interesting. With the new repurchase allotment, Autozone will be repurchasing 8% of the outstanding shares. By default, this will bring Lampert’s ownership up to 44.2% without him buying another share.

That will leave 5.8% (338 thousand shares) left for him to purchase in order for him to invalidate the agreement and vote his shares as he wishes because he will then own 50% of the shares.

One had to wonder then, what is the point of the agreement? Was Lampert pushing for something now and has decided to back off in return for an 8% ownership increase via the repurchase?

It is the only explanation as the agreement simply by itself, for no alternative reason makes no sense and is meaningless.

Something is going on….

Ideas?

Disclosure (“none” means no position):None

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I posted the agreement between Eddie Lampert and Autozone (AZO) this morning and got a flood of questions. Reader Jeff answered 90% of them with this post.

“EBITDAR- Earnings Before Dep./Amor, Interest, Taxes, Rent (lease payments).

Thus, the company can take on long term debt of 2.5x its annual EBITDAR. Relatively modest leverage.

The voting restriction for ESL is basically saying that, if he continues to accumulate, the shares he gets over a certain level (40% now, coming down to 37.5%), he will need to vote them in proportion to how the rest of AZO’s shareholders vote.

So, if all non-ESL shareholders vote 50/50, in aggregate, ESL will be required to vote any of its shares in excess of 40% 50/50 as well. This will stay in effect as long as ESL’s ownership remains in the range of 25% – 50%.

So Lampert gets his wish that they continue to recap a bit, taking on more leverage and buying back more shares, in exchange for some voting concessions.”

Now, something interesting. With the new repurchase allotment, Autozone will be repurchasing 8% of the outstanding shares. By default, this will bring Lampert’s ownership up to 44.2% without him buying another share.

That will leave 5.8% (338 thousand shares) left for him to purchase in order for him to invalidate the agreement and vote his shares as he wishes because he will then own 50% of the shares.

One had to wonder then, what is the point of the agreement? Was Lampert pushing for something now and has decided to back off in return for an 8% ownership increase via the repurchase?

It is the only explanation as the agreement simply by itself, for no alternative reason makes no sense and is meaningless.

Something is going on….

Ideas?

Disclosure (“none” means no position):None

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