Shares of Leucadia National Corporation LUK 1.34% rose 11.6% on Apr 9, (its biggest jump since 2009) after the diversified conglomerate disclosed the divesture of its auto dealer group and a portion of its stake in its beef cattle business for roughly $1.33 billion. The company is reorganising operations to focus on investment banking and advisory services, as it plans to capitalize on the growth opportunities in the finance field.
Leucadiais also renaming itself Jefferies Financial Group, as part of its transformation from a holding company with disparate assets to a financial services company. After receiving shareholders’ approval, the company will trade on the New York Stock Exchange under the ticker “JEF”.
Leucadia is divesting 48% of its stake in National Beef to Brazilian food processing company, Marfrig, for a consideration of about $900 million in cash. The company is selling its entire stake in its auto dealership business, Garcadia, to the Garff family for roughly $425 million. The remaining stake in National Beef (around 31%) will be deconsolidated and will be reflected as an asset of $590 million on the balance sheet.
Leucadia expects to generate a pre-tax gain of up to $1.2 billion from the divestments. The company is boosting its share buyback program and has received board’s approval to repurchase up to 25 million shares, which is double the amount previously approved to buy back.
Jefferies: The Future
Financial services company Jefferies Group is one of Leucadia’s businesses, which was acquired in November 2012. Since then, Leucadia has become a complex holding company, owning a diverse range of operating companies across unrelated industries.
Understandably, this has made it a more difficult business to value — a fact that might have kept investors away. Since early 2014, Leucadia’s shares have traded at a discount to book value. This is unusual for a well-established financial institution like Jefferies Group, which indicates investors’ reluctance in owning other assets attached to the business.