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Friday November 30, 2012
Leucadia & Jefferies: Better together
by Gavin Graham, contributing editor Internet Wealth Builder Leucadia National (LUK) is a value-oriented conglomerate, which we have recommended as a 'mini Berkshire Hathaway'. On Nov. 12, it announced that it is purchasing the remaining 71% that it did not already own in Jeffries Group, which is the largest remaining independent U.S. investment dealer, in a transaction valued at $2.8 billion. Jefferies' shareholders will end up owning 35% of Leucadia. Leucadia has been a long-term shareholder in Jeffries and supported it last year when false rumors of the extent of Jeffries' exposure to eurozone sovereign debt caused its share price to collapse. In fact, Leucadia's co-founders Ian Cumming and Joseph Steinberg were so impressed with Jeffries management that they announced in their annual letter: "We are proud of our ownership and association with Jeffries and believe their response (to the crisis) was their finest hour." Putting actions to their words, the acquisition will result in a shake-up of top management. Mr. Cumming is retiring as chairman and CEO, and president Joseph Steinberg is becoming Leucadia's chairman. Meanwhile, Jefferies CEO Richard Handler will become CEO of Leucadia while the chairman of Jefferies' executive committee, Brian Friedman, will take over as Leucadia's president when the deal closes in early 2013. This helps solve the potential succession issue at Leucadia, where Messrs. Cumming and Steinberg had been together for 35 years. Action now: Leucadia remains a Buy, as its value-oriented investment approach has delivered excellent returns over a long period despite its decline this year. With the combination of the existing management and Jefferies executives, it should continue to do so once the merger has closed. Learn more about this financial newsletter at Internet Wealth Builder. Related articles:
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