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Leucadia National's Game-Changing Strategy


  • The management team at Leucadia announced a major shift in the company's business model on April 9th.
  • The firm is selling off a large piece of National Beef, as well as other assets, to focus in large part on its financial services operations.
  • As part of this, its share buyback program has been doubled, and the firm doubled down on its oil and gas business under the Vitesse name.
  • Management also intends to change the entity's corporate name to Jefferies Financial Group Inc.

The management team at Leucadia National Corporation (NYSE:NYSE:LUK-OLD) is hard at work transforming the business. Long referred to as a mini-Berkshire Hathaway (BRK.A, BRK.B), the conglomerate has spent several years building up its business and diversifying it, but this latest transaction will move in the opposite direction, divesting of some significant assets in order to benefit shareholders by generating value that can be applied elsewhere. While volatility stemming from economic activity will magnify, the likely result will be positive for long-term investors.

Management is selling off some big assets

Shares of Leucadia soared to close up 11.6% on April 9th. This move higher added nearly $900 million to the business’ market value and is based in large part on management’s decision to sell off a sizable piece of the company's stake in National Beef. Last year, the business, of which Leucadia purchased 78.9% for $868 million more than 6 years ago, generated $7.36 billion in revenue.

This places the firm as the fourth-largest US beef company by sales with a 12.5% market share. Only Cargill, JBS, and Tyson Foods (NYSE:TSN) are larger. It’s also the largest US exporter of chilled beef, and is the second-largest US hide tanner with a roughly 27% market share. According to management, 92.7% of the company’s revenue comes from boxed beef and beef by-products.

To benefit from the future growth of the company, management decided to retain 31% of its equity, meaning that management will be divesting nearly 48% of the business to Marfrig Global Foods S.A. (OTCPK:MRRTY), which will also be acquiring 3% in equity from other owners of the business. Total cash received from the sale will total around $900 million, valuing the entire business at $1.875 billion (but with a $2.3 billion enterprise value). However, between now and the time the sale is completed, management expects to extract a further $150 million

This article was written by

Daniel Jones profile picture
Robust cash flow analyses of oil and gas companies

Daniel is an avid and active professional investor. He runs Crude Value Insights, a value-oriented newsletter aimed at analyzing the cash flows and assessing the value of companies in the oil and gas space. His primary focus is on finding businesses that are trading at a significant discount to their intrinsic value by employing a combination of Benjamin Graham's investment philosophy and a contrarian approach to the market and the securities therein.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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