In a move to settle all claims and litigations,
Leucadia National Corporation
) 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.
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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
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
) currently bears a Zacks #3 Rank (Hold) while
The Blackstone Group
) holds a Zacks #4 Rank (Sell).