Leucadia & Fortescue Enter Deal - Analyst Blog

By
A A A

In a move to settle all claims and litigations, Leucadia National Corporation ( LUK ) recently entered into an agreement with Australia-based iron ore producer, Fortescue Metals Group Ltd. The deal had other parties including Fortescue's subsidiary, Chichester Metals Pty Ltd and its one-third owner and founder, Andrew Forrest.

As per the terms of the agreement, the world's no. 4 iron ore producer will be redeeming its royalty notes, issued in 2006 and currently held by one of Leucadia's subsidiary for $715 million. Leucadia anticipates recording $526 million of pre-tax gains from the settlement.

Back in 2006, Leucadia had purchased $100 million worth unsecured notes issued by Fortescue in lieu of 4% revenue share payment from the latter's two mines until maturity in August 2019. However, due to risk of value dilution of the notes from Fortescue's plan to build a series of new mines, a railway and port facilities, Leucadia sued Fortescue and Forrest in 2010. This deal is expected to settle all litigations between the two parties.

Leucadia has been reducing its stake holding in Fortescue Metals Group Ltd. by selling off its shares since 2011. Finally in July 2012, the company sold off its remaining stake in Fortescue for net cash proceeds of approximately $152.9 million. The company anticipates recording $125.8 million in net securities gain in the third quarter of 2012.

Leucadia engages in manufacturing oil and gas drilling services, gaming entertainment, real estate activities, medical product development operations and various other activities involving investments in the United States.

The current Zacks Consensus Estimate for the third quarter of 2012 is 42 cents, representing a annual growth of 135.3%. Estimates for 2012 and 2013 are $3.35 and $1.68, representing a year-over-year growth of 4685.7% and decline of 49.9%, respectively.

We currently maintain a Neutral recommendation on Leucadia. The company's prime competitor Apollo Investment Corporation ( AINV ) currently bears a Zacks #3 Rank (Hold) while The Blackstone Group ( BX ) holds a Zacks #4 Rank (Sell).
 


 
APOLLO INV CP (AINV): Free Stock Analysis Report
 
BLACKSTONE GRP (BX): Free Stock Analysis Report
 
LEUCADIA NATL (LUK): Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: AINV , BX , LUK

Zacks.com

Zacks.com

More from Zacks.com:

Related Videos

Stocks

Referenced

50%
57%
100%

Most Active by Volume

75,031,044
  • $16.26 ▲ 0.31%
64,683,841
  • $99.76 ▲ 2.14%
44,561,744
  • $14 ▼ 6.23%
37,984,130
  • $27.93 ▲ 0.36%
36,148,020
  • $94.39 ▲ 1.49%
33,981,456
  • $22.93 ▼ 1.38%
33,971,527
  • $44.08 ▲ 1.03%
33,685,322
  • $76.95 ▲ 1.32%
As of 10/20/2014, 04:15 PM

Find a Credit Card

Select a credit card product by:
Select an offer:
Search
Data Provided by BankRate.com