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Author: mungofitch Big gold star, 5000 posts Top Favorite Fools Top Recommended Fools Feste Award Winner! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 212905  
Subject: Re: Mungo (OT) Date: 10/7/2012 12:32 PM
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Your thoughts on Leucadia's sale of its full stake in Mueller Industries?
Do they have something up their sleeve or are they expecting financial armageddon?

Very interesting question. I haven't a clue. These guys play it pretty close to the vest.

But that won't stop me from musing. Mungo "never at a loss for an opinion" Fitch.

They have made comments in recent times about their fears, the desire
to strengthen the balance sheet, and the lack of opportunities especially
given the fact that they can't borrow at low rates.
So my speculation is that it's primarily a strengthening of the balance sheet,
and perhaps secondarily ensuring that there is a bit of spare capacity if
a great deal should come along.
My wild guess is that it's not to fund a deal that's imminent, but I have no
good reasoning for that. Indeed, the fact of the very small-profit exit
on the Mueller deal suggests a desire for capital now, not later.
I further speculate that the next deal they do will be (unusually for them)
something that earns money on a regular basis, is the sort of business
that is very much off everyone's radar, and extremely inflation resistant.
In other words, something very much like the National Beef deal in
those particular ways, but perhaps entirely different in all other ways.

They are very worried about inflation. Though I think that fear is
very much misplaced for the next 5+ years, if they can find things
that are nice little earners (they generally aim for 15% pretax) and
also happen to be inflation resistant, so much the better.

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