As I’ve said before, Fidelity National Financial Inc. is always coming up with something new.
After trying for 18 months to take Remy International Inc. public in a conventional way, Fidelity has come up with an interesting twist for an initial public offering of the company.
According to a Securities and Exchange Commission filing, Remy now is planning an IPO of up to 40,000 shares offered only to employees of Remy and Fidelity and their immediate families.
Those shares represent a tiny fraction of Remy’s 31.9 million shares that would be outstanding after the IPO but it would be enough to get the stock listed on either the New York Stock Exchange or Nasdaq, the filing said. The offering is contingent on Remy receiving approval for listing from one of those entities.
Jacksonville-based Fidelity owns 16.3 million shares and would continue to hold a majority stake after the IPO. Fidelity Chairman Bill Foley also is chairman of Remy.
Fidelity is mainly a title insurance company but has historically invested excess cash in outside businesses, including some big acquisitions recently in the restaurant business.
Remy is an Indiana-based company that makes electrical components for automobiles. Its parts are sold under the Delco Remy, Remy and World Wide Automotive brand names.
Fidelity acquired a large stake in the business when Remy emerged from Chapter 11 bankruptcy in 2007 and in August bought additional shares to take a majority position.
Remy lost money in 2008 but has been profitable every year since. It reported net income of $26.2 million on revenue of $587.9 million in the first half of this year.
Remy originally filed for an IPO in March 2011, but the company has been waiting for the right market conditions to go public.
If Remy completes the IPO, its shares will trade under the ticker symbol “REMY.” The 40,000 shares in the IPO would be eligible for trading immediately, according to the SEC filing, but it’s not clear when additional Remy shares would be available in the open market. The company would have to file another SEC registration statement before letting additional shares into the market.
Analyst regains faith in Body Central
After nothing but bad news for four months, one analyst is finally feeling better about Body Central Corp.
After traveling to New York and Boston with senior management of the Jacksonville-based fashion retailer, Oppenheimer & Co. analyst Pamela Quintiliano last week upgraded her rating on the company from “perform” to “outperform.”
Quintiliano set a $19 price target for the stock over the next 12 to 18 months, which is basically double Body Central’s price over most of the past two months. The stock had dropped spectacularly since early May after a series of very disappointing sales reports.
“The worst appears to be behind Body Central with the turnaround gaining traction ahead of street expectations,” Quintiliano said in her report on the company.
“By our calculations, third quarter guidance appears achievable and there’s upside to fourth quarter consensus. Stores have successfully reverted to proven strategies following recent blunders and initiatives in place to support long-term growth,” she said.
After her talks with management, Quintiliano gave a very detailed report about what went wrong. Basically, mistakes in fashion choices in the spring “created a snowball effect.” The company had to mark down merchandise considerably to sell it off.
“The lower price point product sold through while the newer full-price merchandise sat. As Body Central normally receives deliveries daily, this created a significant backlog causing a vicious cycle that not only negatively impacted margins but inhibited weekly testing of new product,” Quintiliano said.
The company finally has been able to clear out its inventory, she said.
Quintiliano had some other interesting tidbits in her report. One is that all 262 stores in the Body Central chain are profitable, even with the recent merchandising problems.
She also said the company recently acquired the bodycentral.com Internet domain name. The website, which currently is at “bodyc.com,” is a significant part of its business, with direct sales from the Internet and catalogs accounting for 14 percent of all sales in the first half of this year.
“The company estimates that over 1 million users annually would try to find them through the bodycentral.com site, which unfortunately was owned by (believe it or not) a one-off Pilates studio,” Quintiliano said.
She also said interim chief executive officer Tom Stoltz is in the running to become permanent CEO. Stoltz, who had been chief financial officer, took over in August when Allen Weinstein resigned as CEO in the wake of the string of poor sales reports.
“We believe he (Stoltz) is being seriously considered and would be very valuable in the role,” Quintiliano said.
Body Central’s stock rose as much as $1.43 to $11.68 Monday after her report, its highest level in three months. The stock had been trading above $30 in early May before the disappointing reports started and had been trading close to $9 for most of the past two months.
Quintiliano is the only analyst recommending purchase of Body Central’s shares these days. Most analysts have taken a wait-and-see attitude toward the company after its recent results. The other five who cover Body Central rate it at the equivalent of “hold,” according to Thomson Financial.
PSS reaches deal to sell dental business
PSS World Medical Inc. last week announced an agreement to sell its specialty dental business to Beecken Petty O’Keefe & Co. for $68 million.
Jacksonville-based PSS, which distributes medical supplies, put the dental division and its skilled nursing facility business up for sale in May as part of a corporate realignment into four areas of focus.
“The proceeds from this sale, which were at the high end of our expectations, will accelerate investments to drive long-term growth in our four focused verticals — physician, laboratory, dispensing and home care and hospice,” Chief Financial Officer David Bronson said in a news release.
Several analysts have expressed uncertainty about PSS’ outlook as it works through the changes. But in a research report issued last week before the dental sale was announced, Credit Suisse analyst Glen Santangelo said the realignment is proceeding better than expected, including faster-than-expected sales of the dental and nursing businesses. He was expecting both divisions to be sold within two to three months for a combined total of about $300 million.
“Given the historic skepticism around the SNF business, we believe the announcement of a successful sale would remove a significant piece of uncertainty,” he said.
After spending a day with Bronson, Santangelo said the current quarter is “trending well” for PSS.
“The combination of a solid quarter and better-than-expected asset sales could re-engage investors and drive outperformance into year-end,” he said.
Santangelo’s report also addressed the never-ending speculation that PSS could be sold.
“We continue to believe that PSS represents an attractive acquisition target for a number of suitors, and other large distributors likely see the strategic and financial value in this asset. While in our view a sale ultimately could prove to be the best path to unlock the significant shareholder value embedded in the company, it is becoming increasingly clear to us that the potential for a deal in the near-term is quite low,” he said.
EverBank stock upgraded
Another Jacksonville-based company received a positive review from an analyst last week. Macquarie USA analyst Thomas Alonso upgraded EverBank Financial Corp. from “neutral” to “outperform.”
“We see opportunity for continued rapid growth, which we believe is not captured in the current valuation,” Alonso said in his research note. He said EverBank’s stock was trading at about nine times his estimated 2013 earnings.
“We view EverBank as well positioned to continue driving above-peer growth in assets both organically and via M&A,” he said.
Alonso has a 12-month target price of $15 for the stock. After going public at $10 in May, EverBank had been trading at about the $12.50 level when Alonso issued his report. The stock continued rising after his report, reaching a new high of $14.11 on Thursday.
Unlike Quintiliano and Body Central, Alonso isn’t alone in recommending EverBank. Four of the other six analysts covering the company rate it as a “buy” (the equivalent of outperform), according to Thomson.
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