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An Activist Making Beautiful Music



May 09, 2011 – Comments (3) | RELATED TICKERS: LVB.DL

As someone who is always on the lookout for special situations, I make it a point to look at Barrno's 13D column every week.  For anyone who isn't familiar with the term, 13D is the name of the form that activists must file with the SEC when they take a substantial position in a company that they want to change.

I mention this week's 13D column because it talks about an activist that I make it a point to follow, ValueAct.  I have seen ValueAct make several successful activist investments in the past.  One of the firm's latest investments is in Steinway Musical Instruments (LVB).

This column often mentions activist situations when the share price of the company that is involved is well above the activist's average cost, indicating that some of the potential upside from piggybacking on the investment may have been lost.  Steinway is particularly interesting because at $24.87, it stock is trading for less than ValueAct's average cost of $26.76 per share.

Steinway is a fairly small company, with a market cap of only $289 million ($24.01/share).  ValueAct now owns just under 10% of Steinway's common stock.  In its latest purchase it recently paid a substantial premium to LVB's current share price with the stipulation that the Company add three independent directors to its board and remove the super voting power for the company's "A" shares, which accounted for under 4% of the company's shares outstanding yet held 80% of the voting rights.

The Barron's article points out that this move is particularly interesting because ValueAct paid a premium for the stock to get concessions from the company that will benefit all shareholders.

13D Filings
Investors' SEC filings on Celera, Fisher Communications, Gold Reserve, K-12, Verigy, Destination Maternity, Amarin, Zhone Technologies, Steinway


3 Comments – Post Your Own

#1) On May 09, 2011 at 5:01 PM, ikkyu2 (98.07) wrote:

Nice catch, Deej.  Thanks for this - filed under "News I Can Use."

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#2) On May 09, 2011 at 5:12 PM, djemonk (< 20) wrote:

Looks undervalued, to boot.  Over the past couple of years, they've been able to crank out about $20M in FCF per year, so even if they grow only as fast as the overall US economy (my estimate is around 2%) per year, with a 9% discount rate I estimate the sum of their FCF to be around $220M.  They've got about $200M in non-goodwill net assets, so I think we're looking at a company with about a 25% margin of safety.  If you think these ValueAct guys can unlock some of that, it could be a good idea all the way around.

How much do you know about them (ValueAct) (or Steinway)?

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#3) On May 09, 2011 at 8:06 PM, TMFDeej (97.65) wrote:

Thanks ikkyu2.  

Hey djemonk.  I've been following ValueAct for a year or so now and they have had an excellent track record of being able to unlock value in companies that they take activist positions in.  I don't know nearly as much about Steinway other than what I have read in the company's January presentation to investors that can be found on its website.


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