Comments on: Rushed to the altar? http://www.footnoted.org/urge-to-merge/rushed-to-the-altar/ Michelle Leder's guide to what's hiding in SEC filings Sun, 12 Oct 2008 02:35:38 +0000 http://wordpress.org/?v=2.6.2 By: David Harper http://www.footnoted.org/urge-to-merge/rushed-to-the-altar/#comment-3501 David Harper Thu, 04 Oct 2007 21:13:04 +0000 http://footnoted.org/urge-to-merge/rushed-to-the-altar/#comment-3501 I was thinking from a valuation standpoint, the "conditional on" takes the SEC letter off the table. The buyer cannot use it to extract concessions, as the terms are negotiated against a clear company. But i get your drift, if the SEC letter puts a cloud over the company and augurs other related future risks, then seller is jumpy. Okay, that might warrant a trip to the tip jar... Regarding the site design, have you analyzed before/ after traffic? It seems like comments are way up after the redesign. I myself do like to look at it :) I was thinking from a valuation standpoint, the “conditional on” takes the SEC letter off the table. The buyer cannot use it to extract concessions, as the terms are negotiated against a clear company.

But i get your drift, if the SEC letter puts a cloud over the company and augurs other related future risks, then seller is jumpy. Okay, that might warrant a trip to the tip jar…

Regarding the site design, have you analyzed before/ after traffic? It seems like comments are way up after the redesign. I myself do like to look at it :)

]]> By: Michelle Leder http://www.footnoted.org/urge-to-merge/rushed-to-the-altar/#comment-3498 Michelle Leder Thu, 04 Oct 2007 11:43:36 +0000 http://footnoted.org/urge-to-merge/rushed-to-the-altar/#comment-3498 If you look at the "background of the merger" section it seems to me that the deal was proceeding concurrent with the comment letter, even though KMG didn't disclose that to Humana until the end of the process. Of course, we may never know, even if the comment letter becomes available. But given where the stock was earlier this year, it's hard to believe that the existence of the comment letter didn't come into the negotiation process. If you look at the “background of the merger” section it seems to me that the deal was proceeding concurrent with the comment letter, even though KMG didn’t disclose that to Humana until the end of the process. Of course, we may never know, even if the comment letter becomes available. But given where the stock was earlier this year, it’s hard to believe that the existence of the comment letter didn’t come into the negotiation process.

]]> By: David Harper http://www.footnoted.org/urge-to-merge/rushed-to-the-altar/#comment-3497 David Harper Wed, 03 Oct 2007 21:21:27 +0000 http://footnoted.org/urge-to-merge/rushed-to-the-altar/#comment-3497 I don't quite follow the logic. The deal was apparently conditional on resolution. So, the valuation et al assumed resolution. Under a bust (no resolution) scenario, KMG's rushing to alter is moot; the deal wouldn't go. If it resolves, the sale is into conditions that contemplated resolution. In other words, selling at a discount into a deal that isn't conditional would indeed be rushing into a "hedge," but selling into a conditional deal means both parties contemplate (plan for) resolution. In my opinion, here is the best indicator lacking specific filing information: on the timeline from first contact, when did KMG first *tell* them verbally - the earlier they did that, the more serious you can infer the contents, if later down the line, probably not serious I don’t quite follow the logic. The deal was apparently conditional on resolution. So, the valuation et al assumed resolution. Under a bust (no resolution) scenario, KMG’s rushing to alter is moot; the deal wouldn’t go. If it resolves, the sale is into conditions that contemplated resolution. In other words, selling at a discount into a deal that isn’t conditional would indeed be rushing into a “hedge,” but selling into a conditional deal means both parties contemplate (plan for) resolution.

In my opinion, here is the best indicator lacking specific filing information: on the timeline from first contact, when did KMG first *tell* them verbally - the earlier they did that, the more serious you can infer the contents, if later down the line, probably not serious

]]> By: vito boscaino http://www.footnoted.org/urge-to-merge/rushed-to-the-altar/#comment-3496 vito boscaino Wed, 03 Oct 2007 17:17:55 +0000 http://footnoted.org/urge-to-merge/rushed-to-the-altar/#comment-3496 Sounds like the KMG executives and Board must have thought that they had some serious exposure with the SEC. It will be interesting to see how it all plays out, though from the looks of it, Humana appears to be holding all the cards. Of course this also assumes that the numbers they looked at in their due diligence were accurate and verifiable. I also wonder how many different definitions of "satisfactory resolution" one could come up with. I suppose it all depends on which side of the table you are sitting on. Sounds like the KMG executives and Board must have thought that they had some serious exposure with the SEC. It will be interesting to see how it all plays out, though from the looks of it, Humana appears to be holding all the cards. Of course this also assumes that the numbers they looked at in their due diligence were accurate and verifiable. I also wonder how many different definitions of “satisfactory resolution” one could come up with. I suppose it all depends on which side of the table you are sitting on.

]]> By: David Merkel http://www.footnoted.org/urge-to-merge/rushed-to-the-altar/#comment-3495 David Merkel Wed, 03 Oct 2007 16:46:21 +0000 http://footnoted.org/urge-to-merge/rushed-to-the-altar/#comment-3495 I remember passing on KMG America as a long candidate early in 2007. The 2006 purchase GAAP adjustments looked odd, and declining Statutory profitability was a concern. Can't remember any more, because those workpapers are with my former employer. Also, almost every company disproportionately involved in long-term care insurance has had trouble, even Genworth. I don't think that long term care is an underwritable contingency. The insured knows much more about his personal situation than the insurer, thus antiselection is high. I remember passing on KMG America as a long candidate early in 2007. The 2006 purchase GAAP adjustments looked odd, and declining Statutory profitability was a concern. Can’t remember any more, because those workpapers are with my former employer. Also, almost every company disproportionately involved in long-term care insurance has had trouble, even Genworth. I don’t think that long term care is an underwritable contingency. The insured knows much more about his personal situation than the insurer, thus antiselection is high.

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