In the meantime, I've made the following purchases, Iron Mountain (IRM), Penn Millers (PMIC), and Company X (I'll post on this one later, as I'm using this idea for the Ira Sohn Investment Contest). Iron Mountain and Penn Millers both fall in the event-driven / special situation theme that I like to invest in when markets are fairly valued.
Iron Mountain is a company I've been wanting to invest in for years. It has recurring revenue, which generates a tremendous amount of cash flow. The part that always bothered me though, was how that cash was being used. You could argue that it was being wasted on needless acquisitions and sub-optimal markets. Well, that's exactly the argument that Elliott Advisors made. Elliott put together a compelling presentation that made the case for reducing capital expenditures, increasing margins in their international markets, and reducing g&a expenses. Elliott also urged management to consider converting into a REIT. Interestingly enough, management seems to be listening. On April 14th, it was announced that Bob Brennan would resign as CEO and Richard Reese (previous CEO and current Chairman) would replace him immediately. Since then, IRM and Elliott have come to an agreement:
- IRM will return $1.2 billion to shareholders in the next 12 months via share repurchases and dividends
- IRM will distribute $2.2 billion to shareholders through 2013
- IRM will consider converting into a REIT
- One of Elliott's nominees will join the IRM Board
- IRM will also explore strategic alternatives for it's digital business
Today, IRM demonstrated just how serious they are about implementing this 3-year strategic plan:
For those of you that are interested in PMIC, I'd direct you to the following, which is a terrific blog and a terrific write up:
PMIC continues to trade below book value. And in the meanwhile, management continues to buy shares at a significant discount. But even better, I believe a buyout offer is in the making. On April 29th, the Lion Fund / Biglari Holdings filed a 13D, which indicates that the Lion Funds / Biglari Holdings now own 8.4% of the outstanding shares. Since the 13D is your typical, boiler-plate filing, it might not seem like much. But, Biglari has been eager to purchase an insurer - one can guess, so he can use the float to make more investments. Biglari aggressively pursued Fremont Michigan Insuracorp (FMMH.PK), but was eventually topped by Auto Club Insurance Association. A closer look at the 13D will show that Biglari's initial purchase of PMIC was on March 9th. But you'll see that majority of the purchases take place on April 18th, the same day that FMMH announced it's agreement to be purchased by Auto Club.
