Ever since the Florida East Coast Railway was bought out by private equity firm Fortress Investment Group LLC in 2007, we’ve been waiting for the company to go public again. Now seems like a pretty good time for an initial public offering.
The new U.S. policy that may open up trade opportunities with Cuba would make FEC a very attractive stock, because the 351-mile railroad that starts in Jacksonville is the only rail line that connects to the port of Miami. Actually, it makes FEC attractive as a buyout candidate even if it doesn’t go public.
Back when Florida East Coast Industries Inc. was a public company, its stock was always sensitive to hints that trade may be opening up with Cuba. Of course, that never panned out.
One investment manager who constantly talked up FEC was Thomas Herzfeld of Miami Beach, who runs a mutual fund called the Herzfeld Caribbean Basin Fund.
The Herzfeld fund invests in companies with economic ties throughout the Caribbean, but its particular focus is Cuba. The fund’s ticker symbol is “CUBA.”
Herzfeld began buying shares of FEC in the early 1990s and its investment in the railroad company represented about 20 percent of the fund’s assets before FEC was bought out by Fortress.
The Herzfeld fund was invested in one other Jacksonville-based company, Trailer Bridge Inc., before the marine freight company filed for a Chapter 11 bankruptcy reorganization in 2011. Trailer Bridge was also looking to provide freight service to Cuba if trade ever opened up.
Shares of the Herzfeld fund jumped as much as 47 percent Wednesday after President Barack Obama announced his new Cuba policy.
Herzfeld probably still has FEC on his mind because one of the fund’s current holdings is Norfolk Southern Corp., one of two major railroads that connect to FEC in Jacksonville. It does not own shares of the other railroad, Jacksonville-based CSX Corp.
The fund also owns shares of Fort Lauderdale-based Seacor Holdings Inc., which acquired 47 percent of Trailer Bridge in the bankruptcy reorganization.
The only other company in Herzfeld’s current portfolio with ties to Jacksonville is Vulcan Materials Co. Trade with Cuba could include building materials produced in Florida by Vulcan.
Herzfeld’s largest current holding, in terms of market value, is Panama-based Copa Holdings, which owns airlines that provide flights to Cuba and other Caribbean destinations.
However, if you want to speculate on what Jacksonville-based company could generate the most interest as Cuba opens up, FEC is a likely candidate.
Fortress, like other private equity firms, usually buys out publicly traded companies with the intention of cashing out by taking them public again a few years later or finding a private buyer for the business.
Fortress did that with another Jacksonville-based railroad operator, RailAmerica Inc.
Fortress acquired RailAmerica in 2007 and then took the short-line railroad operator public again in 2009. Fortress retained 60 percent of RailAmerica’s stock after the IPO but three years later, the entire company was sold to Genesee and Wyoming Inc.
Fortress will almost certainly at some point seek to cash out its investment in the historic Florida East Coast Railway, which was built by Henry Flagler more than a century ago. The opening of Cuba could be the catalyst to a deal.
The Pantry agrees to $1.7 billion buyout
A French Canadian company last week agreed to a $1.7 billion buyout of The Pantry Inc., the convenience store business that operates the Kangaroo chain.
Alimentation Couche-Tard Inc., which operates 6,303 convenience stores in the U.S. and Canada under several brands, will add 1,512 stores in the Southeast by acquiring The Pantry.
Jacksonville is the second-largest market behind Charlotte for Cary, N.C.-based Pantry, with about 250 stores in the region that includes counties outside the five-county Jacksonville metropolitan area.
The Pantry became a major player in the market when it acquired Lil’ Champ, a homegrown Jacksonville convenience store chain, in 1997. The company eventually converted all of its area stores into Kangaroo.
Couche-Tard’s U.S. stores operate mainly under the Circle K brand.
“The Pantry is an excellent company and is well positioned in the Southeastern and Gulf Coast regions of the U.S., two of the fastest growing areas of the U.S. With this transaction we will add more than 1,500 stores to our network which will position us as the definitive leader in this region and will reinforce our position as one of the largest convenience store operators in North America,” Couche-Tard CEO Brian Hannasch said in a news release.
Couche-Tard also has 2,239 stores in Europe under various brands and it licenses the Circle K brand to about 4,600 stores in 12 other countries.
The company reported total revenue of more than $18 billion in the first nine months of this year.
The Pantry reported revenue of $7.5 billion for the fiscal year that ended Sept. 25.
The companies did not announce plans for branding of The Pantry’s stores after the merger, which they hope to complete in the first half of 2015.
The Pantry’s stock jumped $6.66 to $35.52 Wednesday after The Wall Street Journal reported the company was seeking a buyer.
Quebec-based Couche-Tard announced the agreement to buy The Pantry for $36.75 a share on Thursday morning.
The total $1.7 billion buyout price includes the assumption of debt.
Couche-Tard stockholders also benefited from the deal. Its stock rose 3.67 to a record closing high of 46.21 Canadian dollars Thursday in trading on the Toronto Stock Exchange.
Coach stock rises on takeover speculation
Coach Inc.’s stock has also been moving higher on a published report about a possible takeover, although this report seemed more speculative.
Retail industry news website Prime Retailer reported that French conglomerate LVMH has “recently shown interest in Coach,” the handbag and accessories company that has its North American distribution center at the Jacksonville International Tradeport.
Coach’s stock has dropped over the last two years as its sales slumped, leaving it vulnerable to a possible takeover.
LVMH owns leather goods and accessories company Louis Vuitton, as well as champagne producer Moët & Chandon and cognac maker Hennessy.
According to the Prime Retailer report, which cited unidentified sources, LVMH has been looking at other acquisition targets and “it’s unclear whether with Coach there’s a potential acquisition looming or it’s more of a competitive interest.”
Coach’s stock rose from $33.62 before the report on Dec. 11 to a high of $36.62 last week.
Regency Centers sees higher 2015 earnings
Regency Centers Corp. last week issued a forecast of slightly higher earnings for 2015.
The Jacksonville-based shopping center developer is expecting core funds from operations of $2.91 to $2.97 a share, up from its expected 2014 core FFO of $2.81 to $2.83.
Funds from operations, or FFO, are basically earnings excluding depreciation and amortization expenses and are considered the key metric for evaluating real estate companies.
Regency said it expects net operating income from properties operated for more than one year to rise by 3 percent to 4 percent in 2015.
Regency also said it profited from its failed attempt to buy a smaller shopping center developer, AmREIT Inc. After rejecting an initial unsolicited offer from Regency, AmREIT in November accepted a higher bid from Edens Investment Trust.
Regency invested $14.3 million in AmREIT stock as it was attempting to buy the entire company. After AmREIT’s agreement with Edens, Regency cashed out of its investment with a net gain of about $6 million, the company said.
Landstar System names new CFO
Landstar System Inc. last week announced that Kevin Stout is being promoted to vice president and chief financial officer of the Jacksonville-based trucking company.
Stout has been with Landstar since 1997, most recently as vice president of finance and corporate controller.
Stout is succeeding James Gattoni as CFO, as Gattoni assumes the role of chief executive officer. Landstar announced Gattoni’s promotion in October, when current CEO Henry Gerken said he would retire at the end of this year.
(904) 356-2466