Detroit Bear
Deep value, special situations, long-term horizon, value

Roundy's Has Hit A Capital Allocation Inflection Point

The last few years have been very painful for Roundy's (NYSE:RNDY) shareholders. After IPOing below its hoped levels, shares have been swinging wildly. At one point, shares surged over $12 and sported a robust quarterly dividend of $0.23 per share. The dividend was a prime example of private equity influence, as previous owners Willis Stein cashed out on what was likely a fairly mediocre investment.

As Willis Stein's influence waned and the company began managing its capital slightly better, the dividend was sliced to $0.12 per share, which was still an unsustainable amount. In order for the company to pay for its acquisition of Safeway's (NYSE:SWY) shuttered Dominick's stores, Roundy's suspend its dividend - a move...

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