A solid if unspectacular quarter. One has to be struck by the optimism expressed on the call.
Key quote (paraphrase):
“We are excited about the current and upcoming acquisition environment and see the bid/ask gap that exists in the private company sale market narrowing. We are in the unusually advantageous position of being able to deploy capital without the assistance of 3rd party financing”.”
Other Comments:
Also any acquisition will be immediately accredive to earnings.
It is reasonable for one to think an acquisition will be done in 2009 or early 2010…
Regarding bid/ask spread, the “ask” price is coming down either from more realistic expectations or urgency on the part of the seller.
Expect employment trends to move to 4.5%-5% contract labor. Will have a huge effect on staffing industry
This is a quick video but for those who do not want to watch, here is the salient point.
CEO Massoud does a great job in the three minutes allotted him in describing the principle difference between his company, Compass Diversified Holdings (CODI) and the KKR’s and Blackstone’s (BX) of the world.
Of course the gang missed the opportunity to ask him what he may be doing with it in term of potential deals but that is another point I guess.
Disclosure (“none” means no position):Long CODI, none
This is a quick video but for those who do not want to watch, here is the salient point.
CEO Massoud does a great job in the three minutes allotted him in describing the principle difference between his company, Compass Diversified Holdings (CODI) and the KKR’s and Blackstone’s (BX) of the world.
Of course the gang missed the opportunity to ask him what he may be doing with it in term of potential deals but that is another point I guess.
Disclosure (“none” means no position):Long CODI, none
We have talked here before about Dow Chemical (DOW) and its place in the economic food chain. Its basics plastics division is ground zero for the economy. Any economic improvement will be felt here first as the order to make stuff to sell come there before anywhere else.
In addition, as a chemical company, the remainder of it’s businesses if we explain them in the most simplest terms “make the things that people use to make things”. Bottom line is not many physical items get produced without a products from somewhere in Dow’s production chain.
With all that said, we must watch Dow’s operating capacity and demand for its products to get a true feel of what is happening in the general economy.
Now, a codicil. Dow is a global company. While a large part of its final sales are to the US, you cannot extrapolate verbatim the following chart to the US. They do correlate, but not 100%.
All these charts are very good news for the general economy. Note, this does not mean we are out of the woods as in many areas we are still be,ow last year levels. It is good news because we are seeing continued gains. The better news was the phrase that “production is meeting demand”. That means there is very little inventory in the system so any growth will mean continued gains.
Was alerted by reader Enrico to the following article on Richard Heckman and the more I read, the more interested I got.
Some quick valuation numbers: Assets= $456m (after $184m goodwill write-down on China Water assets) Liab. = $13m Debt = $0 Cash = $199m M Cap = $350m
From the company’s website:
Heckmann Corporation (NYSE: HEK) is a holding company that was created to make investments in attractive businesses. The Company completed its first investment, the acquisition of China Water in October 2008, now operating as wholly-owned subsidiary, China Water & Drinks, Inc. On July 1, 2009, the Company completed its second investment, the purchase of a multi-modal water disposal, treatment, and pipeline transportation business in Texas, now operating as wholly-owned subsidiary, Heckmann Water Resources Corporation. The Company also makes strategic minority interest investments, such as its recent investment in Underground Solutions, Inc. (OTC: UGSI).
We have a strong balance sheet and seek additional acquisition opportunities as we build a worldwide enterprise. As of March 31, 2009, we had $300 million dollars in invested cash and cash equivalents. We intend to make additional investments and acquisitions as we find attractive long-term opportunities for our stockholders.
Palm Desert entrepreneur Richard Heckmann is diving back into the water business, with an aim to consolidate the bottled water industry in Asia, much like he did in the United States to the tune of billions in revenue.
The former chief executive of Palm Desert-based US Filter said early Tuesday that his acquisition firm would acquire China Water and Drinks Inc. for about $625 million. Heckmann said China’s rampant groundwater pollution, coupled with its population of 1.3 billion people, provide for an ample market. About 250 companies produce and sell bottled water in China, a hefty number that Heckmann said he hopes to consolidate.
During the conference call, Heckmann said China Water ranks fifth in overall revenue among competitors in Asia, behind Coca-Cola China….
…Heckmann’s blank-check company raised $450 million in an initial public offering in November. At that time, Heckmann was coy about what companies he would be interested in buying.
“We like water, but we like everything,” he said last year.
I really like this. It is another buy for less than book value ($4.02) in a company with no debt and near 50% of the share price is cash on the books. The two businesses they have bought to this point are very good businesses. China Water is a leader in its field there (yes there was a problem with some folks there “skimming” but that has been address and their shares/warrants cancelled, hey, its China) and the Greer Exploration is a very interesting business that oil & gas companies cannot do without (a better explanation of it is in the release that follows).
CEO and Chairman Richard Heckman owns just under 12% of the outstanding shares. Goldman Sachs (GS) recently (last quarter) took a 4.7m share stake in the company.
. Today I bought some Compass Diversified Holdings @ $8.82 a share.
What is Compass Diversified Holdings (CODI) and what do they do?
Acquires controlling interests in profitable small to middle market businesses in attractive niche industries;
Works with the management of those companies to pursue growth opportunities, provide strategic support and increase cash flow in the intermediate to long term;
Provides investors an opportunity to participate in the ownership and growth of businesses that traditionally have been owned and managed by private equity firms, wealthy individuals or families or large corporations;
Enables our shareholders to participate in the operating cash flows of our companies through the receipt of regular distributions; and
Offers sellers of middle market businesses transaction financing certainty and an efficient and streamlined due diligence process.
Watch these following videos (apologize for video performance). The first from October 2008 then January 2009 with CEO Joseph Massoud:
What is interesting is the outlook and patience from Massoud. In October he saw companies “holding on” to assets and then in January, saw them coming onto the market. It is also important to note that through the crisis he did not jump in early rather preferring to wait until summer/fall. To me that says he is a very disciplined CEO who plan on making deals this year. Along this line, Compass recently raised $45 million in a stock offering to raise additional funds for investment opportunities.
Now $45 million may not sound like a lot of money, but when you consider they have over $300 million available through credit agreements AND the company has a current market cap of $277 million, the potential to make a deal that provides large and immediate earnings boosts is very real.
Today I bought some Compass Diversified Holdings @ $8.82 a share.
What is Compass Diversified Holdings (CODI) and what do they do?
Acquires controlling interests in profitable small to middle market businesses in attractive niche industries;
Works with the management of those companies to pursue growth opportunities, provide strategic support and increase cash flow in the intermediate to long term;
Provides investors an opportunity to participate in the ownership and growth of businesses that traditionally have been owned and managed by private equity firms, wealthy individuals or families or large corporations;
Enables our shareholders to participate in the operating cash flows of our companies through the receipt of regular distributions; and
Offers sellers of middle market businesses transaction financing certainty and an efficient and streamlined due diligence process.
Watch these following videos (apologize for video performance). The first from October 2008 then January 2009 with CEO Joseph Massoud:
What is interesting is the outlook and patience from Massoud. In October he saw companies “holding on” to assets and then in January, saw them coming onto the market. It is also important to note that through the crisis he did not jump in early rather preferring to wait until summer/fall. To me that says he is a very disciplined CEO who plan on making deals this year. Along this line, Compass recently raised $45 million in a stock offering to raise additional funds for investment opportunities.
Now $45 million may not sound like a lot of money, but when you consider they have over $300 million available through credit agreements AND the company has a current market cap of $277 million, the potential to make a deal that provides large and immediate earnings boosts is very real.
Chesapeake Energy Corp (CHK)= $8,197,837 Autonation Inc De (AN)= $8,108,089 U S Auto Parts Network Inc (PRTS)= $5,479,067 Masco Corp (MAS)= $5,373,467 Advance Auto Parts Inc (AAP)= $4,027,086 eLoyalty Corp (ELOY)= $3,643,883 General Electric Co (GE)= $3,519,818 Colonial Bancgroup Inc (CNB)= $3,231,103 Gentek Inc (GETI)= $2,078,775 Extra Space Storage Inc (EXR)= $1,962,000 Flagstar Bancorp Inc (FBC)= $1,866,900 Integramed America Inc (INMD)= $1,790,000 Energy Transfer Equity L P (ETE)= $1,325,946 Prospect Capital Corp (PSEC)= $1,238,194 Liberty Media Corp Capital Group (LCAPA)= $1,219,004 Compass Diversified Holdings (CODI)= $1,112,150 Sepracor Inc (SEPR)= $1,048,000
Chesapeake Energy Corp (CHK)= $8,197,837 Autonation Inc De (AN)= $8,108,089 U S Auto Parts Network Inc (PRTS)= $5,479,067 Masco Corp (MAS)= $5,373,467 Advance Auto Parts Inc (AAP)= $4,027,086 eLoyalty Corp (ELOY)= $3,643,883 General Electric Co (GE)= $3,519,818 Colonial Bancgroup Inc (CNB)= $3,231,103 Gentek Inc (GETI)= $2,078,775 Extra Space Storage Inc (EXR)= $1,962,000 Flagstar Bancorp Inc (FBC)= $1,866,900 Integramed America Inc (INMD)= $1,790,000 Energy Transfer Equity L P (ETE)= $1,325,946 Prospect Capital Corp (PSEC)= $1,238,194 Liberty Media Corp Capital Group (LCAPA)= $1,219,004 Compass Diversified Holdings (CODI)= $1,112,150 Sepracor Inc (SEPR)= $1,048,000
