Some pictures of the inexplicable amount of road cones on my walk to work this morning
Why are four of them congregated presumably on their smoko break?!
Regular programming
Freda gone at Estée Lauder (at long last!) — this came a little earlier than expected but everybody was expecting it… EL guided for a fairly lackluster 2025 (recession when?) and not much happened to the stock, but we have started acquiring this in smalls for our wholesale strategy clients + personal accounts. We started buying it around $99 — it’s cheap and while I think there’s a lot of headwinds (Shisedo owns Drunk Elephant, Tatcha, while Puig has a great portfolio too…and then there’s the matter of the Korean brands that are, frankly, so good), the company remains with a good portfolio of brands — some selective pruning and acquisitions and a fresh new leader will do it good.
Borrowing from Nick Sleep’s great letters:
Only this week Estée Lauder, a company which we much admire and would consider owning if only someone would sell it to us at a reasonable price, announced that earnings would decline as the firm had decided to invest in brand building instead. Such investment could be expected to raise long term revenue growth and pricing power but, even so, the share price declined 15% on the news. The reason was that short term investors responded to the warning about next quarter’s profits and missed the long-term outlook. As Fred Schwed would say “pay no attention to this”. In effect the company had been punished by the markets for being sensible. It is this behaviour that gets us excited and sets up investment opportunities.
That was written in June, 2002. In 2002 Estée Lauder made $4.7bn of revenue and had operating earnings of +$458mn. In FY24 it made $15.61bn and $1bn in operating income (excluding extraordinary items). It is trading at almost ten year lows. It took a long time, but it is finally the right price (only a couple of decades after Sleep wrote that!)
Paramount — from one heir to another to another — We’ve been talking a lot about Larry Ellison’s son, David, wanting to buy Paramount — now another heir Edgar Bronfman, Jr would like to buy Paramount for $4.3bn, please and thank you. Bronfman Jr is an heir to what was the Seagrams fortune. Seagrams, of course, was one of the world’s largest liquor companies. Bronfman famously lost the family business in a series of hair (heir) brained deals and decisions. Bronfman Jr sold the family’s stake in DuPont back to DuPont. That occurred for 70% of the company’s earnings. He then took his $9bn from that and bought Polygram Records, Universal Pictures and MCA. It finally sold itself to Vivendi in an all-stock deal, but Vivendi was a house of cards, per Spears:
Universal ate money in the early Bronfman years, but Efer went on acquiring (PolyGram for $10.4 billion in 1998). At the height of the media and dot.com boom in 2000, he sold the whole of Universal Seagram to the French conglomerate Vivendi for $35 billion in shares (Efer described it as a merger).
Vivendi was a fraudulent house of cards, inflated by a boom market, French national pride and a magnetic madman – Jean-Marie Messier. Over the following three years the share price collapsed by 84 per cent and Edgar Bronfman Jr., had resigned as vice-chairman.
The liquor assets were sold to Diageo and Polygram, while Vivendi eventually became a core holding of Bollere and family (eager readers will recall that Vinny Bollere spun-off UMG from Vivendi — as with most things, Bollere ended up making a lot of money here, first by feasting on the carcass of Vivdeni/What remained of Seagrams).
Bronfman Jr, meanwhile, went and bought Warner Music Group and then sold it for north of $3bn (WMG now is worth just shy of $15bn…this kid just can’t catch a break). And now he’s back! He would like to pay $4.3bn for Paramount! David Ellison has offered $8bn for National Amusements + Paramount. His deal is, lol, pretty bad. Per Deadline:
The offer is said to consist of a $2.4 billion payment to Shari Redstone for her family holding National Amusements, which controls Paramount Global through its majority of Class A voting shares. Some $1.5 billion would be injected into the company’s balance sheet to pay down some debt and ensure investment grade. Most of the rest would go towards a $400 million breakup fee to Skydance, Deadline understands.
Oh yes — what I love to do is buy a company and pay a $400 million dollar breakup fee. I also love to not offer anything to Paramount Shareholders.
If Kendall from Succession was real, maybe he’d be Bronfman Jr.
NZ
Fletchers — New CEO, which is all fine and dandy, but where is the new chair? Babs Chapman and co hanging on. I’ve previously called for a breakup of assets to unlock value and still think there is some merit to this. If you have a nail through your head perhaps buying some FBU stock is a good idea. It is cheap. But there is the ongoing risk of pipes litigation in Aussie… I don’t quite have a nail through my head, yet.
BAI — Has 1/3rd of the market cap of Rakon (and rising). Why?? What is the value there? Nobody seriously believes this company is worth over $100,000,000, do they?
RAK — Reminder I will be there along with fellow shareholders next Tuesday.
Source post: Blackbull Research - Substack