The company, in response to Jefferies’ $500 million stock offering, will purchase $125 million of the investment bank’s common shares. The purchase will increase Leucadia’s stock holding in Jefferies to 27.83% from 27.54%.
Leucadia’s investment in Jefferies is treated as an investment in an associated company and is carried at fair value. As of December 31, 2010, the company’s investment in Jefferies was valued at approximately $1,314.2 million.
Leucadia is engaged in manufacturing, telecommunications, oil and gas drilling services, property management and services, gaming entertainment, real estate activities, medical product development operations and various other investment activities in the United States. The extensive diversification has not only helped the company flourish over the years but has also brightened its growth prospects.
In the fourth quarter of 2010, the company posted encouraging results with earnings per share of $6.77, up compared with a net loss of 34 cents per share in the year-ago quarter. Fiscal year 2010 earnings per share was $7.66 compared with $2.18 per share in the previous year. The improvement was primarily due to significant revenue growth and tax benefits, offset partially by higher expenses in the year.
Conversely, the company’s investments in volatile materials, such as base metals reduce the value of its investments. Moreover, Leucadia faces intense competition from various companies in different industries including Apollo Investment Corporation (AINV), The Blackstone Group (BX) and privately-held H Group Holding Inc.
We currently maintain our Neutral recommendation on Leucadia.
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