Marty Whitman Takes On Warren Buffett
Third Avenue opposes Clayton Homes acquisition.
Fund Spy
When Warren Buffett buys out one of a fund manager's holdings, it's a bittersweet moment. On the one hand, the manager is happy that the world's greatest investor has placed his stamp of approval on the investment.
On the other, he or she usually hates the price Buffett is paying. After all, Buffett didn't get where he is by overpaying for companies. Buy-and-hold investors might have spent weeks researching a firm before buying. Therefore, they're expecting a big reward on that investment of time and money when the market recognizes a company's value. However, Buffett typically pays only a small premium on a company's share price. Of course, the fund managers who own Berkshire Hathaway (BRK.B) are usually happy about this. So, it's not uncommon for managers to be on both sides of a Berkshire deal.
Still, those who are getting their shares bought out will often just accept their fate because Buffett is usually holding all the cards, and they aren't interested in tangling with a rightly revered investor.
Marty Whitman enjoys a good fight, however, and he's leading an effort to get Clayton Homes shareholders to reject Berkshire's takeover offer. The acquisition is priced at $12.50 a share--just a 13% premium to where the shares were trading when the offer was made.
Third Avenue Real Estate Value (TAREX) manager Michael Winer argues that Clayton Homes was improperly valued because the analysis was done on the trailing 12 months, which represented a cyclical trough for the manufactured-home maker.
"Just as it would be inappropriate to value a business based on one year's operating results at the peak of a cycle, I believe it is inappropriate to value Clayton Homes based on one year's operating results at what appears to be the trough of the cycle," Winer said.
Winer is going to have to be persuasive because his fund holds only 0.2% of Clayton Homes shares. A couple of other investors have joined in the opposition to the deal, too. The shareholder vote is set for July 16, so stay tuned.