RE:RE:RE:Hidden Value - do the mathHermannHaller wrote: I think that's management's position, that they could just borrow the money instead. But they are not doing that either. I mean, if they have a plan that is anywhere near as accretive to earnings, I would be happy to hear it.
The fact is that they are sitting on a windfall, shareholders should receive some benefit. The windfall has come from an over-heated real estate market. No one is buying SXP as a real estate play, they need to do something with it. We wouldn't even know about this value if GC didn't get it added to the proxy.
Companies that care about creating value for shareholders often take advantage of mispricing between public and private markets. Fairfax did this last year, selling a portion of a subsidiary and using the proceeds to do a substantial issuer bid. The sale of Odyssey to a couple of pension funds got a great price, and they used the money to buy back shares below book value. SXP similarly has a great opportunity here.
The board is prudent about capital allocation, as they should be. As to the value of the real estate, it's been alluded to a couple of times on these boards.
Selling the properties and leasing them back should be properly planned, including the fiscal part of it. Done right, you can monetize 100% of that in due time. Forcing the hand of the board imo would make for lower returns. It's not like the value will evaporate in time, especially considering they would keep the current use of the properties. The value of commercial real-estate (industrial class here) is a value of its own, which while it has appreciated, isn't directly correlating to the housing market.
Regarding the loans, the enveloppe portion of the company probably can't secure by itself a loan at a decent cost of capital. The packaging probably can get a loan in some form.
Ownership is already fairly concentrated. The buybacks are increasing their ownerships, which could threaten the smaller shareholders rights (and value). As a long term shareholder, I'd rather see them increase their market share in packaging instead.