Ian Cumming Eliminates Mueller Industries Position, Buys Jeffries in Final Transaction

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Nov 14, 2012
Ian Cumming is the chairman of Leucadia National (LUK, Financial), a publicly traded investment company that owns subsidiaries in various industries. The value-oriented investors at Leucadia typically invest in distressed companies and turn them around for a profit. With this approach, they have posted compounded returns of more than 20% since 1978. Cumming announced in an SEC filing in November that he would resign as chairman of the board and CEO of Leucadia upon completion of an upcoming merger.

In the third quarter, Leucadia eliminated its holding of Mueller Industries (MLI, Financial) and made no other changes to its portfolio.

Leucadia sold all 10,422,859 shares it owned of Mueller Industries for $44 per share on average. It opened the position in the first quarter of 2011 and made two subsequent additions to the holding in the next two quarters at average prices of $33, $36 and $42, respectively.

Mueller Industries is a plumbing, HVAC, refrigeration and industrial products company with a global client base. Leucadia mentioned it in its annual letter in April:

“In summary last year was a pretty good one. We harvested some gains on our Fortescue stock and we like our holdings of Jefferies, Inmet and Mueller and expect they will do well if the economy continues on its recovery. On the following pages we will get into the details of a new business and our investments and other businesses and at the end make a few more comments on the future outlook for both the economy and Leucadia.”

Leucadia’s stock in the last year declined 12%. Leucadia may have sold out to raise money to purchase Jeffries, a company it owns 28.56% of already. According to the SEC filing, each former share of Jeffries common stock, par value $0.0001 per share (except Jeffries shares Leucadia already owns), will be converted into the right to receive 0.81 of a Leucadia common share.

Mueller Industries on Oct. 13 reported third quarter net income of $15.5 million, or 41 cents per diluted share, compared to net income of $10.5 million, or 27 cents per diluted share, a year previously. Net sales declined to $514.2 million from $585.8 million a year previously. Sales declined primarily due to lower selling prices, particularly of copper.

The company’s ratio of debt to total capitalization was 29.5%, which increased due primarily to borrowings for its $427.4 million share repurchase in the quarter.

Meuller expects 2013 to be a better year for housing and commercial construction, according to its third-quarter statement. It commented: “"Absent disruptions to the market from potential changes in federal tax and spending policies, we should see improved demand levels for our products, especially as we move into the seasonally stronger spring months."

The stocks remaining in Leucadia’s portfolio are Cowen Group Inc. (COWN, Financial), INTL FCStone (INTL, Financial) and Jeffries Group (JEF).

To view Leucadia’s holding history and more info on the companies, see its portfolio here. Also check out the undervalued stocks, top growth companies and high yield stocks of Ian Cumming.