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Chris DeMuth Jr.
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"It's not given to human beings to have such talent that they can just know everything about everything all the time. But it is given to human beings who work hard at it - who look and sift the world for a misplaced bet - that they can occasionally find one." - Charlie Munger I look... More
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  • Heads, I Win; Tails, I Don't Lose Much With OUTD 24 comments
    Mar 17, 2013 11:47 AM | about stocks: OUTD

    In my book note on The Dhandho Investor: The Low - Risk Value Method To High Returns, I discussed the concept of "heads, I win; tails, I don't lose much" in which investments are purchased close to their downside, but still have substantial prospects for a healthy return. Which investment opportunity available today meets this criteria? Outdoor Channel Holdings, Inc. (OUTD), for one.

    Tails, I Don't Lose Much with OUTD

    Let's go through "Tails" as we prefer starting with our downside. There is an $8.75 all cash deal with Kroenke Sports for OUTD. Our view is that this reflects the reasonably likely downside in OUTD. The current market price for OUTD reflects a small discount to this level.

    Heads, I Win with OUTD

    What is OUTD worth? On a subscriber basis, OUTD is probably worth at least somewhere in the high teens per share. In terms of what a bidder could pay, InterMedia Outdoors could bump their bid to $10-11 per share of OUTD based upon current synergy estimates.

    Disclosure: I am long OUTD.

    Themes: InterMedia, Kroenke Stocks: OUTD
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Comments (24)
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  • Do you think that intermedia could come back to the table? I figured they would have come back with a bigger bid within that 5 day allotment for the counter bid. Any other possible suitors? I think I saw someone mention on whopperinvest that Malone was looking for more channels for starz but i dunno how great a fit this would be.
    17 Mar 2013, 02:53 PM Reply Like
  • Author’s reply » I think it would be a fine fit for Mr. Malone.


    I think that this is worth far more than $8.75 for InterMedia. In fact, I think that they already raised their bid. Five days is a very short period of time.
    17 Mar 2013, 03:06 PM Reply Like
  • i hear you, and then they can use the break up agreement money in part of coming back to the table
    17 Mar 2013, 03:32 PM Reply Like
  • Author’s reply » It also take a few days to get over being angry about a deal falling apart. One can unhappy for a few days. That's fine. Then it is time to get back to work and do what makes sense (which is for InterMedia and OUTD to combine).
    17 Mar 2013, 03:35 PM Reply Like
  • it does all make pretty good sense that they would come back. the cable content providers are in a secular trend that is completely changing the industry. Given that they have more and more places to provide their content to, they have realized they can earn more for their product as long as the distributors are willing to keep them. To ensure the demand for their product is there, bigger becomes better, and cable companies are less inclined to view them as an expense they can cut when they own several streams of content that viewers want. This can be seen in the OUTD bidding war; John Malone spinning STARZ off as a single entity value it better and to start its own acquisition spree; Cablevisions spin-off of AMCX last year; and the repeated public battles between distributors and content providers cutting off service. This trend probably helps enforce the view of little to lose but plenty to gain.
    17 Mar 2013, 06:06 PM Reply Like
  • Author’s reply » Exactly.
    17 Mar 2013, 08:09 PM Reply Like
  • It looks like you're getting into the merger arb business, Chris. Are we going to see a position in DELL next ;).


    Thanks for sharing. I'm definitely going to take a look. I have been spending all of my available research time on STTYF lately. I'm getting a lot more comfortable with it and the likelihood of a significant increase in cash flow serving as a catalyst for the share price in the near future. I've been drilling down into the progress on the specific projects it has invested in and the financial strength of its partners and things actually look better than I had expected.


    17 Mar 2013, 07:52 PM Reply Like
  • Author’s reply » I have been in the merger arb business for years. And, incidentally, yes. Publishing soon.


    You're welcome.
    17 Mar 2013, 08:10 PM Reply Like
  • i don't know if u r aware of it but jim roumel anf fund,who is an an activist has a large position in sttyf..they wrote up a fundemental report on co in late 2012 i believe
    i love the business concep of if ---i lend u money i win ,if u default i win bigger


    management has a record of increasing shareholder value


    i keep buying stock under 38 c my own homework and research leds me to believe that w stable commodity prices..comoany can earn north of 10c p/s with in 18 months..pretty cheap
    25 Mar 2013, 05:45 AM Reply Like
  • Oh, if you want to see a buyout that's terrible for current shareholders, take a look at EnergySolutions (ES). I'm not complaining because I bought in at $1.66, never enough shares in hindsight of course :), but I still think that its worth a whole lot more...and I'm not even that bullish on nuclear.


    17 Mar 2013, 07:57 PM Reply Like
  • Author’s reply » ES' price is highway robbery. It is worth much more than shareholders are receiving.
    17 Mar 2013, 08:11 PM Reply Like
  • Do you like HOGS as well or not enough upside?
    18 Mar 2013, 09:53 AM Reply Like
  • Author’s reply » I can't knowledgably comment; we have shorted a lot in China but are rarely long there.
    18 Mar 2013, 05:51 PM Reply Like
  • Author’s reply » Heads: On April 30, 2013, InterMedia Partners VII, L.P. and InterMedia Outdoors Holdings, LLC (together, “InterMedia”) delivered a written proposal to Outdoor Channel Holdings, Inc. (“Outdoor Channel”) (NASDAQ:OUTD), proposing to acquire, on the terms and conditions set forth in the proposal, all of the outstanding shares of common stock of Outdoor Channel, at a price of $9.15 per share in cash (representing a superior proposal to Outdoor Channel’s pending transaction with Kroenke Sports & Entertainment, LLC).
    30 Apr 2013, 04:37 PM Reply Like
    30 Apr 2013, 05:41 PM Reply Like
  • Author’s reply » Nice. Me too.
    30 Apr 2013, 05:45 PM Reply Like
  • this system is working out pretty well, i kinda like it. its a shame AUTO went the way it did, but hardly lost any money on it. And in this instance with OUTD system worked beautifully. Seriously thanks to you and Whopper for the heads up on this.
    30 Apr 2013, 05:49 PM Reply Like
  • Author’s reply » You're welcome. I hope that you make a lot of money on OUTD.
    30 Apr 2013, 05:51 PM Reply Like
  • Great news, but still room for a higher bid.
    1 May 2013, 12:41 AM Reply Like
  • Author’s reply » Yes; exactly.
    1 May 2013, 07:26 AM Reply Like
  • Chris-


    $9.15 is less than 5% higher than KSEs proposal. Do you think this is over or do you expect more bidding. I know what I prefer but that is different than what I think will happen.
    30 Apr 2013, 06:13 PM Reply Like
  • Author’s reply » I would be surprised if this ends at $9.15. I expect more bidding.
    30 Apr 2013, 06:17 PM Reply Like
  • Outdoor Channel Agrees to Increase to $10.25 Per Share in Transaction With Kroenke Sports & Entertainment

    8 May 2013, 07:56 PM Reply Like
  • Author’s reply » Excellent
    8 May 2013, 09:05 PM Reply Like
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