What do you do when your letters and pleas get ignored? Turn them into a presentation of course because pictures and charts are just so much harder to ignore.
That seems to be superstar hedge fund manager John Paulson’s approach for turning up the heat on Hartford Financial Services Group (HIG). After having no success writing letters to the board or bullying the CEO on a conference call, Paulson amended his 13D filing to include a presentation expounding on his reasoning behind a HIG spinoff. As our earlier post described in greater detail, Paulson is pushing for the company to split its life and property & casual insurance units believing that its P&C arm is undervalued and ignored as currently structured. He believes the move could increase the value of the company by over 60%. In his presentation Paulson presents his reasoning, swats aside those pesky ‘challenges’ and lays out the value proposition of a spinoff. His method? Create a NewCo to house the P&C business, issue some new cheap debt, use that money to pay off old debt that will remain in HIG and then dividend a debt free NewCo to shareholders. Easy as pie. As he notes in the presentation, many other Fortune 500 companies have had success spinning off parts.
In response, the company reiterated its earlier statements that it recognizes that “there are potential benefits to a separation of the P&C and life companies…” but “there are challenges to successfully executing a separation…We are evaluating the company’s strategy and business portfolio with the goal of delivering shareholder value. We remain objective and pragmatic about the best ways to achieve this goal.”
What?! Still evaluating! It’s been like, an entire month! Apparently, Mr. Paulson is not very big on patience. In his defense, he is only asking the company to “announce a spinoff today” – the company can then spend the next year or so figuring it out. So generous. He is really turning up the heat on the company and this should be fun to follow.
I do have at least one quibble with the presentation. It included a list of recently completed spinoffs and announced spinoffs (slides 18-19), but Sears/Orchard and Ralcorp/Post were on the announced list. Those two happened already! Easily could have found that out by checking out our site’s calendar. Give us a look John!
Disclosure: Author holds no position in any stock mentioned.